Watch Out for Currency Controls

Dave Gonigam – November 16, 2011

  • Symptoms of late-stage empire: Another overextension of the military, hostility to outsiders. Are currency controls next?
  • “Inflation” as measured by the U.S. government stalls: Michael Pento on why it’s bound to pick up again
  • A different kind of 1%: Byron King on how “you’ll pay” for indecision over the Keystone XL pipeline
  • How to “buy physical” and still lose money on paper gold… Readers pile on a fellow reader’s “knife-to-the-wife’s-neck” scenario… And make sure to scroll down to see our “booksafe” solution for precious metals — in action!

   Who says the United States doesn’t know how to export anything anymore? Why, just today, the U.S. is exporting a contingent of 2,500 Marines to Australia!

We beg your indulgence as we connect some disparate dots this morning…

   President Obama and Australian Premier Julia Gillard cut the troop deal today in Canberra, providing for what The New York Times describes as “the first sustained American military presence in Australia.”

“We are here to stay,” declared Mr. Obama. “This is a region of huge strategic importance to us.”

This is not exactly new.

References to the Pacific as an “American lake” date back to at least the early days of World War II. But why the muscle flexing now? Why did Secretary of State Hillary Clinton declare “America’s Pacific Century” this month in Foreign Policy magazine?

We thought it might have something to do with China, and the “brewing war” with the United States we saw taking shape last month.

But no.

“The notion that we fear China is mistaken,” said the president today. “The notion that we are looking to exclude China is mistaken.”


   Meanwhile, as the United States government exports troops, it has increasing trouble importing visitors.

In 2000, the United States attracted 17% of the world’s tourists, according to the U.S. Travel Association (USTA).

Now, it’s 12.4%.

“During this ‘lost decade,’” says a USTA report, “our economy squandered an opportunity to gain $606 billion in total spending from 78 million additional visitors — enough to support 467,000 more jobs annually.”

The problem?

It’s a lot harder to get a visa to visit the U.S. in the post-Sept. 11 world. Now you have to be “interviewed” before you can visit and spend your money here. There aren’t many visa offices at which you can be interviewed.

In 20 Chinese cities, for example, of more than 20 million residents, there are no U.S. visa offices. More Chinese now visit France than the United States.

   We now cast our gaze toward Argentina… where the U.S. dollar is still considered a valuable currency. So valuable the Argentines withdrew $645 million in dollar-denominated deposits from private-sector banks during the first week of November.

That’s a 4.3% drop in total dollar deposits in five days.

On Oct. 31, 2011, the Argentine government imposed currency controls, attempting to limit access to dollars. Argentine citizens reacted by securing as many dollars as they could… while they still had the chance.

The government’s excuse was a crackdown on money laundering.

“But most analysts,” according to Dow Jones News Service, “say the real aim of the crackdown on dollar purchases is to stem capital flight that has cut central bank reserves to $46.57 billion from $52 billion in early August.”

In other words, people want to dump their increasingly worthless pesos.

What does that look like on the street level?

“The official exchange rate is 4.28 pesos for every one U.S. dollar,” says our man on the scene, Daily Reckoning managing editor Joel Bowman. “But on the black market — or the ‘blue market,’ as it’s known here — the rate is as high as 5.2-to-1.”

“There is a large gap between the two extremes because basically there are no sellers” of dollars, one trader tells the Buenos Aires Herald.

   We’ve long thought currency controls are just a matter of time. With the mounting national debt, something’s gotta give. The easy “something” is the nation’s money. But have you thought about what you’ll do when that day arrives?

“For some farseeing Americans,” we wrote in the Apogee Advisory in June, “the prospect of becoming trapped by their government in a worthless currency is not a historical curiosity: It’s a matter of urgent action.”

Already we saw a “virtual Berlin Wall” going up around Americans and their money. Events in Argentina this week remind us it can happen at a moment’s notice.

You’re not helpless. After considerable thought and research, we’ve developed a solution that we deliver to every new reader of Apogee Advisory. Access here.

   Consumer prices as manipulated by the Bureau of Labor Statistics fell 0.1% last month. Credit most of the change to a 2% drop in energy prices.

The year-over-year increase still looks ugly — 3.6%. And that’s before all the geometric weighting, substitution and hedonic adjustments.

Factor that out and report the number the way it was back in Jimmy Carter’s day — this is what John Williams at does — and the real annual increase is 11.1%.

   About that drop in energy prices last month? Forget it. Crude oil topped $100 a barrel this morning for the first time since June.

   “The Fed’s ultra-low interest rates and QE programs have caused the money supply to increase and prices to rise,” observes Michael Pento. “And it’s going to get worse.” He sees an official, manipulated CPI of 10% in the near future.

“Now the Fed is on ‘Operation Twist,’ a plan to take long-term interest rates lower,” Michael goes on. “Once it has failed like everything else the Fed has tried, Bernanke, the grand student of the Great Depression, will undoubtedly resort to more outright money printing, as only the counterfeiter-in-chief could provide.”

“In other words, expect more money printing because it’s the thing the Fed does best. It will send the money supply booming even more, the dollar lower and inflation soaring.”

As a defense, “You need a diversified portfolio of international stocks that pay a dividend,” he advises. “These companies should derive most of their revenue outside of the United States, Europe and Japan — and, preferably, have a significant exposure to precious metals and commodities.”

   “Delay may kill the Keystone XL expansion,” says Byron King of the Obama administration’s move to put off a decision on the pipeline project until after the election next year. “One way or the other, you’ll pay for this over the next couple of decades.”

Keystone XL would carry oil from the oil sands of Alberta through the Great Plains down to the Gulf Coast. Environmentalists don’t like it. The decision to not decide will keep 900,000 barrels a day off the world market — about 1% of the world’s daily use.

“Without new pipeline capacity,” says Byron, “this Canadian oil is ‘stranded.’ That is, it’s faraway from large refineries. After the oil makes its way to the surface in Alberta, it has to go somewhere — you can’t exactly drink it.”

“So this Canadian oil will either come to the U.S. via the XL pipeline extension and then be available in Houston — at ground zero of the American energy market. Or it won’t.”

Indeed, it might accelerate plans to build a pipeline to Canada’s Pacific Coast to ship the oil to Asia.

“This does underscore,” Canadian Premier Stephen Harper said over the weekend, “the necessity of Canada making sure that we are able to access Asian markets for our energy products.”

“I indicated that yesterday [Saturday] to President Hu of China,” he added.

In the meantime, Byron is urging readers of Outstanding Investments to hold onto their Canadian oil sands play. A rising oil price will still lift its boat.

   Gold sold off this morning, but is already staging a recovery. After retreating to around $1,750, the Midas metal is back to $1,768. Silver’s at $33.84.

   Now for a cautionary tale about precious metals: Sometimes, “buying physical” is more complicated than it sounds.

Turns out Gerald Celente, The Trends Journal editor and a familiar name to 5 readers, has been caught up in the meltdown of MF Global.

Celente accumulates physical metal, yes. But here’s how he does it: “I keep buying futures until I have enough money to take delivery of the contract,” he explained in an interview with Lauren Lyster of RT, who visited us at our Safety & Survival Summit in Baltimore last month.

“I got a call on Monday and they said I needed to have a margin call. I said, ‘What are you talking about, I’ve got a ton of money in my account?’ ‘Oh, no you don’t. That money’s with a trustee now.’”

Celente isn’t the only gold bull who’s standing in line with MF Global’s other creditors. Hedge fund manager and MarketWatch columnist Bill Fleckenstein had money from his personal account at the firm too.

“Maybe the name MF?” Celente added. “I’m thinking the first word of MF is ‘mother.’”

   “How,” a reader inquires rhetorically about the prize offered by a European retail tycoon for a solution to the eurozone mess, “can anyone possibly apply ‘high-quality’ economic thought when there is no accurate data?”

“The banks are hiding the true nature of their debts. The central banks are hiding their balance sheets and their machinations. The governments are hiding their debts. No one, including the governments and the banks, knows the true situation.”

“The best an economist can do in such a situation is to wave their hands really fast.”

   “I was amused,” a reader writes, “to read about the gentleman who presented the scenario of a thief breaking into his home and putting a knife to his wife or child’s throat looking for gold.”

“Long before he allowed his loved ones to be placed in that position, he should have taught the thief his final lesson: Don’t bring a knife to a gunfight. Then provide the thief with a large deposit of another type of precious metal — lead.”

The 5: You weren’t the only one amused. To wit…

   “I am quite surprised,” another writes, “that the intruder lived long enough to get to the wife’s neck.”

“I assume,” adds another, “most folks who are savvy enough to own real gold are also skilled in the art of barter. In this case, with your wife in his death grip, just give him lead instead. Heck, you don’t even have to barter. Just outright give him the lead.”

“Let me tell you,” says yet another, “ if things really do get that tough, do you not think that every household will be fortified better than to let a burglar get in with a knife?”

One thing is for sure: ‘Never show up to a gunfight with a knife.’ Let’s hope this global currency fiasco doesn’t go that far, but prepare yourself!

   “That little excerpt,” adds one more, “about a thief breaking in and holding a knife to your wife’s throat would make a great novel. Urge the reader to elaborate on it.”

“Don’t forget an Xmas (Eve) setting, heavy snow, no lights, a gun in the safe with the half a million in cash and an attack dog safely locked up in his pen in the backyard. And the cousin who’s about to visit in a hour.”

   “The problem with stashing gold behind drywall construction,” writes a Reserve member, mercifully bringing us back to the original question about precious metals storage, “is the ability to locate it with a common metal detector. Hiding it in or behind something metal would mask it.”

“Try removing some light fixtures and placing it between the fixture and the ceiling or inside the chassis or ductwork of an HVAC system. Or in the lower (water) section of a double boiler pan in the kitchen cabinet.”

   “Take the mirrored medicine cabinet off your bathroom wall,” advises another. “Insert gold in that space between the studs and replace the medicine cabinet.

“Make sure it’s a metal cabinet, not the new plastic type, so if a metal detector is used, nothing will seem out of the ordinary. Be sure to tell someone else where you hid your gold.”

The 5: But not too many people, heh. We’re fascinated by the sheer amount of email we’ve gotten in reply on this issue. Only yesterday did this editor get a look at the solution that Addison has fashioned with the help of a specialist in restoring antique books…

Truly, the picture doesn’t do justice to the ingenuity of the solution. It looks from the outside like copies of Financial Reckoning Day, Empire of Debt and Mobs, Messiahs, and Markets.

But then as you pick up one of them, you realize they’re a single unit. And when you open up Financial Reckoning Day and get to about Page 20, you come upon your little hiding space.

“This is the best use of these books yet,” Addison mused yesterday as he looked upon it in his office.

Of course, a storage solution like this isn’t much good unless you have some precious metals to put in there. Our exclusive offer of one Gold Buffalo and 10 Silver Eagles is still available, and still darn near free — considering everything else that comes with the package.

Supplies are dwindling by the day. At last check, fewer than 20 remained. (Here’s where you can get yours.)


Dave Gonigam
The 5 Min. Forecast

P.S. The glass head is not part of the package.

P.P.S. If you registered to learn more about Project X, you know our HQ in Baltimore has been abuzz the last day and a half. Early projections for enrollment have exceeded expectations. Addison’s been in and out conducting last-minute operations, changes… and what have you.

Apparently, for every six people who registered to learn more, only one spot remains open.

If you’ve registered to learn more about Project X and haven’t yet claimed your “Discount Charter Membership,” I have been asked to let you know to you should check your inbox for the invitation. The “discount window” has been moved up. and will now be closing by midnight tomorrow night.


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