Financial repression is a devious tactic.
At some point, every heavily indebted government uses it. It’s inevitable. And no entity on the planet is more indebted than the US government.
So, understanding what financial repression is and how to protect yourself from it is critical—whether you live in the US or any other indebted country.
Financial repression is a big umbrella term. You’ve probably heard it thrown around. Here’s a refresher from the Financial Times:
Financial repression is a term used to describe measures sometimes used by governments to boost their coffers and/or reduce debt. These measures include the deliberate attempt to hold down interest rates to below inflation, representing a tax on savers and a transfer of benefits from lenders to borrowers.
Financial repression is also used to describe measures to facilitate a domestic market for government debt and the imposition of capital controls. The combined effect of all these measures means funds are channeled to the government that would otherwise flow elsewhere.
The Financial Repression Authority recently had me on their show to discuss how this is playing out right now.
I’m sharing our discussion below.
If, like me, you value privacy and personal liberty, you won’t want to miss it.
Financial Repression Authority (FRA): Let’s begin with your thoughts on the war on cash. Where do you see that trending?
Nick Giambruno: I’m not going to mince words. The war on cash is evil. It’s an all-out assault on your privacy.
George Orwell once wrote, “If you want a picture of the future, imagine a boot stamping on a human face—forever.”
Not exactly a cheery thought. Unfortunately, we may be headed toward this dark future… and soon.
It’s a world where privacy is dead, where the government knows everything about you. And we’re almost there.
The government already knows what you watch on TV, what you read on the internet, whom you call, and everything you do on your smartphone and computer.
It has a record of every penny you’ve ever earned, saved, borrowed, or spent. It knows where you’ve been, where you are, and where you’re going.
This is all possible thanks to the mountain of laws and regulations that sprouted from the war on (some) drugs, the war on terror, and so forth. Over the years, these schemes have incrementally destroyed your privacy.
Now, with the war on cash, the government is going in for the kill.
There’s not much about your life the government doesn’t already know. The last vestiges of privacy may vanish very soon. Once that happens, governments will have almost unbreakable control over the individual.
This is exactly the opposite of how a free society should work.
The war on cash does not protect you from drug dealers or terrorists. It only helps the government seize more power. This is why proponents of big government reflexively support it.
There’s also a psychological aspect to this relentless anti-privacy campaign. The government and its media allies have convinced the average person that “privacy” is a dirty word.
They’ve duped people into believing that only criminals and wrongdoers want privacy. “If you have nothing to hide, you have nothing to worry about,” as the popular, but wrongheaded, adage goes.
Many have forgotten that privacy is fundamental to preserving human dignity and protecting individuals from government overreach.
Financial privacy is by far the most demonized aspect of privacy.
This is a huge clue. Governments wouldn’t hate financial privacy so much if it weren’t so important to individual liberty.
Politicians around the world see people as milk cows. They merely exist to be squeezed to the last drop. That’s why politicians are so eager to kill financial privacy. They’re building a giant tax farm and erecting electric fences to keep the cows and their milk from escaping.
Overzealous governments have been attacking financial privacy for decades. Now, they’re within striking distance of killing it once and for all.
The war on cash is their final push.
The death of privacy in general, and financial privacy in particular, will have far-reaching sociopolitical consequences. It will irrevocably skew the balance of power in favor of the government and against the individual.
I call it “the new feudalism.”
A world without privacy is a giant step backward for human freedom. It’s the new Dark Ages that Orwell grimly predicted.
That’s why the war on cash is such a disturbing trend. But it’s a growing trend, nonetheless—not just in the US, but around the world.
FRA: Do you see governments getting involved with cryptocurrencies as part of the war on cash?
Nick Giambruno: First, it’s critically important to distinguish between a decentralized private cryptocurrency—like bitcoin—and a centralized cryptocurrency, which the government controls.
Bitcoin is a decentralized, non-state currency. Anyone in the world can use it.
In short, it’s financial kryptonite against the war on cash.
Bitcoin doesn’t use the traditional financial system. It has no central authority. Instead, it runs on a decentralized network scattered around the world. If you take certain steps, you can essentially make anonymous transactions.
You can take any amount of bitcoin in and out of any country. You don’t need permission from any government. You can send it—or take it with you—across borders as often as you want. And there’s nothing anyone can do about it.
With bitcoin, there’s no central location for a SWAT team to raid. There’s no “capo” to arrest. The government can do nothing but play an endless game of whack-a-mole across the globe.
It’s basically impossible for the US government, the Chinese government, or any government to kill bitcoin without shutting down the entire internet… and keeping it turned off.
I’ve seen this firsthand in Latin America. Governments there use capital controls to trap money within their borders so they have more to confiscate. Bitcoin helps people get around this because governments can’t freeze, seize, or block bitcoin transactions.
This is why bitcoin is such a disruptive and exciting technology. Just look at the surge in the bitcoin trading volume in crisis-ridden Venezuela recently.
Bitcoin’s resilience to government interference terrifies politicians everywhere. That’s a wonderful thing. They can (and will) try to regulate bitcoin, but they will fail.
There’s an ongoing demonization of private cryptocurrencies. It’s similar to the war on cash. The folks pushing the war on cash tell us ludicrous tropes, like only drug dealers and terrorists use large amounts of cash.
They say the same lies about private cryptocurrencies…
“Only terrorists and drug dealers use bitcoin,” and so forth.
What they’re really doing is laying the groundwork to further restrict cash and cryptocurrencies by demonizing them.
FRA: Do you think that governments will allow private-based cryptocurrencies to exist?
Nick Giambruno: First, let me say that it’s terrible for some bureaucrat to threaten people with state violence for voluntarily using their currency of choice.
But, back to your question…
The government doesn’t have a choice. It can try to control and regulate cryptocurrencies. But I don’t think the US government will have much more success than, say, Venezuela does in trying to control currencies that they don’t like their citizens to use. The cat is out of the bag.
It’s also instructive to look at file sharing on BitTorrent, a similarly decentralized technology.
BitTorrent has been around for over 15 years. Despite the US government’s best efforts to shut it down, it’s still easily accessible.
FRA: Do you think central banks will promote the war on cash to make implementing negative interest rates easier?
Nick Giambruno: Absolutely.
Central bankers are a bunch of witch doctors who’ve convinced everyone they’re neurosurgeons. So don’t place your confidence in them.
Instead, I recommend thinking for yourself. You don’t need any special training to be your own economist. You just need a healthy dose of common sense.
Negative interest rates are a bizarre, perverse concept. Basically, someone is getting paid to borrow money. It’s completely backwards.
Negative rates could not exist in a free market with voluntary interactions and sound money.
They’re only possible because of legalized fraud, government coercion, and central economic planning.
If you don’t like losing money to negative interest rates, you can certainly stash your cash under the mattress. As a practical matter, this limits how far governments and central banks can take negative rates.
The more it costs to store money at the bank, the less people will do it.
Of course, central bankers don’t want you to withdraw money from the bank. This is a big reason behind their totalitarian war on cash.
On a related note, you don’t even own the fiat Federal Reserve Notes you deposit in your bank account. Once you deposit paper money at the bank, it’s no longer your property. It belongs to the bank.
What you own is a promise from the bank to repay you. That’s a very different thing from cash in hand. Yet 99.9% of people wrongly conflate the two.
The currency in your bank account is really just an unsecured liability. Technically, you’re a creditor of the bank.
And that means a bank bail-in would probably burn you.
A bail-in is when a bank recapitalizes itself by tapping its creditors. That includes all of its average Joe depositors.
We saw this happen in Cyprus in 2013. Since then, bail-ins have been codified into law in the EU, Canada, and the US.
The next time big banks get into trouble—which is a virtual certainty with the fraudulent fractional reserve system—they’ll dip into depositors’ accounts to try to keep the Ponzi scheme running.
Lastly, the US already has negative interest rates.
While interest rates in the US are nominally positive, when you factor in the real rate of inflation, they are clearly negative.
Editor’s Note: Politicians and central bank “witch doctors” are threatening more than your privacy. Together, their schemes have created an unparalleled hazard to your financial security. Find out all the details in a special video with Doug Casey and his team.
Editor’s Note: Right now, cryptocurrencies can do much more than shield your privacy. Our colleague Teeka Tiwari over at the Palm Beach Research Group can show you how to make huge profits on tiny crypto plays… all within 90 days. You can even start by investing as little as $100. Click here for the details.