A Right Way and a Wrong Way to Weather “The War on Cash”

This article was submitted by Addison Quale, SchiffGold Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.

Many people have been talking recently about the “war on cash.” With policymakers seriously talking about eliminating cash, it can be worrisome. But there is a way to avoid the consequences of the “war on cash. You just need to pick the right strategy.

With the endless lowering of interest rates and the possibility that they could turn negative, there is more incentive than ever for people to pull their dollar savings from banks and just hold on to the paper cash at home. After all, why risk your dollars in a bank that yields zero return or even charges you to hold your money? As a result, people are buying up safes, pulling their dollars out of the bank, and storing them at home.

They are kind of missing the point though. As this article points out, if interest rates are making you want to hold your money outside the banking system, why not just get REAL money and hold it outside of the banking system? Why not just buy physical gold and silver coins and bars? If you are going to buy a safe, THAT’S what you should be storing in it.

This is definitely a message someone should give to the Japanese, who are now buying up safes hand over fist.

Keeping physical cash at home may mean your wealth is “outside the banking system,” but it is still very much “inside the fiat-currency system.” Fiat currencies will fail one day and the dollar with them. So cash offers no protection in that sense. So those who think they are being smart by hoarding paper currency at home are actually a bit mistaken.

Normally, people are reluctant to buy the metal argue that it just sits there offering you zero yield. But physical cash will just “sit there” as well – its value eroding away thanks to inflation. Metals, by contrast, are a much better option.

Some mention the possibility that your metal might be confiscated by the government as they say there is a precedent for that under Franklin Delano Roosevelt. But first off, no metal was ever physically confiscated. People voluntarily brought their gold to the banks and were paid fiat dollars for them. Those who did not were not hunted down. Government agents never went door-to-door taking gold.

Second of all, during that time the US was on a form of gold standard monetary system. Gold was an admitted official part of the monetary system. It is no longer. We are no longer on the gold standard. And as you may recall from Ron Paul’s encounter with Ben Bernanke, “The Fed only holds gold because of ‘tradition’”.

Just to make this point a bit further, there really is no precedent for the government going to people’s homes and stealing their gold and silver. Can you even imagine such a thing happening here in the US? You’d basically be asking for an armed revolution in response. Additionally, do you realize how costly it would be to go door to door with armed agents rummaging through peoples’ stuff trying to find their metal? It’s just not worth it. In light of this, the idea of confiscation is really more of a bogeyman scare-tactic to keep everyday citizens from owning the real thing.

Don’t be dissuaded. Protect yourself from the “war on cash” the right way. Buy gold and silver.

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