Wealth Confiscation You Won’t See Coming
Con·fis·ca·tion (känfəˈskāSH(ə)n/), noun. The action of taking or seizing someone’s property with authority; seizure.
Over the last eight years, many of us in the newsletter business have repeatedly warned about the possibility of involuntary bank “bail-ins.” These would entail confiscation of a percentage of your financial wealth to recapitalize insolvent banks and/or reduce public sector debt. That’s one reason why we continually recommend offshore storage of gold bullion as a hedge against this threat.
With Republicans in control of the executive and legislative branches of the federal government, this threat has probably diminished considerably (although never say never). But given Trump’s stated plans for the next four to eight years, there is a much worse danger lurking … one that demands the same course of action.
It’s the Dollar, Stupid
No, I don’t think you’re stupid. After all, you’re subscribed to Sovereign Investor Daily. That means you’re one of the smarter people around.
Way back in 1992, Bill Clinton’s Louisianan consigliere James Carville put up a sign in the Clinton campaign headquarters that read simply, “It’s the economy, stupid.” It was meant to remind staffers that elections are ultimately won and lost on bread-and-butter issues.
That was certainly the case this year. Although Republican vote totals were about the same in 2016 as they were in 2008 and 2012, almost 9 million people who had voted Democrat in those elections either voted third party or abstained. To me, that says that they no longer wanted to buy what the Democrats were selling, but they also didn’t want to vote for Trump.
There’s only one plausible explanation — those voters want action on the U.S. economy, now, and the Democrats either can’t or won’t provide. Trump promises to do so.
- He has pledged to restructure the U.S. workforce to reduce the supply of foreign workers in order to raise wages.
- He wants to spend a trillion dollars on infrastructure and increase military spending, cutting taxes and raising the deficit at the same time.
- He wants to erect trade barriers against China and other countries to reduce our dependence on imports, revive U.S. manufacturing and create higher-paying jobs.
- He has a loose attitude toward U.S. public debt — remember, U.S. Treasurys are considered the safest asset in the world — and thinks it can be “renegotiated.”
Every single one of those proposals spells very bad news indeed for the U.S. dollar.
Purchasing Power Is Everything
We desire money because it allows us to obtain things we need and want. The more valuable the dollar is relative to other currencies, the more we can buy — and vice versa.
My colleagues Jeff Opdyke and Chad Shoop have argued persuasively that Trump’s specific mix of policy proposals, if enacted, would be recessionary and inflationary. That’s because of their impact on U.S. public debt and the volume and direction of global trade. As we have already seen from China’s angry reaction to Trump’s trade threats, his policies will also be geopolitically explosive.
A world in which U.S. deficits skyrocket, global trade diminishes due to tariff barriers, and other countries gain a powerful incentive to break free from U.S. financial and economic domination is one in which the dollar will buy less and less. It’s not hard to imagine a situation in which the U.S. is forced to enact currency controls to prop up the dollar.
So what should you do? The same thing we’ve been telling you for years.
Get some gold and hold it outside the U.S.
Sidestepping Wealth Confiscation
Let’s say the dollar tanks, and the Treasury Department slaps restrictions on the purchase of foreign currency to try to prop it up. I lived with that exact situation for years in South Africa.
In such a circumstance, if you have some gold stored in a foreign country that has its own currency, and/or provides easy access to safe-haven currencies like the Swiss franc, you can simply sell some of that gold in exchange for the stronger foreign currency. That way your purchasing power is preserved.
But what if your gold is stored far away? How are you going to access it and get foreign currency when you sell it?
Here’s an easy and solid solution: Open a storage and brokerage account with my friends at Miles Franklin Ltd. They have secure allocated and segregated space in Brink’s vaults in Vancouver, Toronto and Montreal that are Foreign Account Tax Compliance Act (FATCA) compliant, so you don’t have to report any gold holdings to the U.S. government. Their security protocols are unique, and Canada is easily accessible to Americans.
In addition, by law, all Canadian banks must purchase Canadian Maple Leaf coins from anyone who wants to sell one. If you have Maple Leafs (or any form of bullion, really) stored in Canada, you can exchange them for Canadian dollars or other currencies as needed.
Presto: You’ve beaten both a falling dollar and potential currency controls.
You don’t need to store all your bullion in Canada, by any means. Some of it should be stored in more distant locations like New Zealand Vault as a hedge against other threats.
But as the threat to your prosperity shifts from outright confiscation to “stealth confiscation” via dollar collapse, I strongly recommend that you hide away some purchasing power north of the border.
Editor, The Bauman Letter