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My colleague Larry Edelson was prescient, as always, with his reporting about the ongoing war on cash worldwide.
Larry commented early and often about the desire on the part of governments everywhere to transform us into a cashless global economy. Making it easier than ever to track – and tax – every single transaction anyone makes, anywhere on earth, right down to the last penny.
Intellectual heavyweights, including economists Joseph Stiglitz of Columbia and Harvard’s Ken Rogoff, have long trumpeted the virtues of a cashless society, abolishing cash in favor of a digital currency.
Rogoff has argued that too much cash simply contributes to an underground economy and that large-denomination bank notes should be retired.
India’s government listened.
You may recall that late last year, India took radical action to de-monetize its economy, by withdrawing the equivalent of $220 billion worth of currency from its economy in one fell swoop.
In November, the government announced that 500- and 1,000-rupee bank notes would be abolished. They also capped the value of older currency exchanged at banks, and they curbed withdrawals from individual bank accounts and ATMs all across India.
It was all done to help purge India’s economy of “black money” and crack down on tax evasion. Ken Rogoff must have been pleased.
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| A gold bar in the hand is worth more than cash in the bank if we go cashless. |
India is a highly cash-based economy, with nearly 80% of transactions paid for in cold hard cash, compared with just over 20% of transactions in the U.S.
A total of 15.4 trillion rupees was sucked out of India’s financial system almost overnight. That’s equivalent to 86% of all currency in circulation!
Think about the impact that would have here at home on American consumers.
Of course, the predictable result was a shock to India’s financial system and a severe liquidity squeeze that hammered consumer confidence, sending India’s entire economy into a fourth-quarter tailspin.
An innocent bystander in India’s cashless crusade was demand for gold. In fact, gold imports by India slowed sharply in December, with overall purchases in 2016 slumping to the lowest level in seven years.
And since India is the world’s second-biggest consumer of the yellow metal after China, gold’s 10% decline in the fourth quarter of last year is due in no small part to India.
The good news: The currency shock to India’s financial system from going cashless appears to be over.
Banks are flush with cash again, giving a lift to lending…
What does this mean for gold?
India’s demand for the yellow metal is likely to rebound with a vengeance. Even with restrictions in place on the amount of gold that can be purchased, Indians will just buy smaller amounts more often.
Or they will simply shift a large part of their gold purchases underground, spurring growth in India’s black market for gold, and beating the government at its own game, exactly as Larry predicted.
The World Gold Council conducted a survey last year in which two-thirds of respondents in India agreed with the statement: “I trust gold more than the currencies of countries.” And 73% of those surveyed agreed that: “Gold makes me feel secure for the long-term.”
Bottom line: As global governments marginalize their paper currencies in a misguided quest to go cashless, the more demand there will be for the ultimate hard currency, gold.
Good investing,
Mike Burnick
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Mike Burnick, with 30 years of professional investment experience, is the Executive Director for The Edelson Institute, where he is the editor of Real Wealth Report, Gold Mining Millionaire, and E-Wave Trader. Mike has been a Registered Investment Adviser and portfolio manager responsible for the day-to-day operations of a mutual fund. He also served as Director of Research for Weiss Capital Management, where he assisted with trading and asset-allocation responsibilities for a $5 million ETF portfolio.
{ 23 comments }
Iif NYSE crashes, will precious metals mining stocks fall along with all other categories? If so will they rebound quicker….how much quicker? Relates to availability versus demand for gold going forward.
Will mining metals stocks crash with other stocks?
The last 9 crashes or major corrections miners have gone up 7 of the 9.
If we have a bond market crash and the banks close how does the stock market get to 45,000 on the Dow? W
The only stocks that went through the roof during the Great Depression of 1929-1932 were the MINING STOCKS ! Larry was a student of history, telling his subscribers that history does repeat itself. When the next crash takes places – the mining stocks will go into the stratosphere.
I believe I read in one of the Weiss letters that Larry Edelson passed away. Is that true?
Apparently it is true… news services report that he passed away, at age 62, at home in Florida on March 2, 2017. R.I.P. friend Edelson.
India’s demonetization effort was an utter flop. Things are back to the usual in India.
It sounds like the public in India accepted their new normal cashless society and rolled over. I can’t see this happening without one hell of as struggle in the U.S.. I firmly believe these so-called intellectual heavyweights want a cashless society but it puzzles me how they are arrogant or ignorant enough to think they will somehow be exempt from the control the Gov’t/global elites will exercise over them as well as the rest of us peons. Right now they are useful idiots helping sell this garbage. This kind of Utopian society/thinking is 180 degrees out of phase with real America but it did bring us Radical Progressive Gov’t for the last 8 years……which was a total disaster and rejected by normal voters.
Shocked to hear about Larrys demise. My sincere condolences to his family and the Weiss
family. He will be dearly missed.
What happens to his report(s), or who will be making precious metal commentary and buy
recommendations as we go forward?
Someone at Weiss should send every subscriber like myself an email about what happens
going forward, and more about Larry. I’ll be very disappointed if this doesn’t occur.
I think it is shameful that no one in your organization has written an obituary for Larry Edelson.(unless I somehow missed it.) He was a great financial commentator and I will miss his columns. Thank you- f.w. belland
I keep hearing about paper money but nothing about coins.
Is that also stop and go the same as paper money? ( Made with metal)
Or for other things like valuable coins too.
Thanks in advance.
I doubt there is anyone who can fill Larrys expertise. He was engulfed in his research and it showed.
I don’t know how to make remarks about people after a sudden death. I ten to keep quiet and wish for years that I’d said something. So hoping for “without regrets”. I’ve been reading Larry Edelson’s weekly reports and some of his publications for 3-4 years. He might not have approved of the term but he was a “Voice crying in the wilderness” for me. His steady consistent message of what was coming and why was frightening of a sort. But also calming to know that it was a natural process of cycles repeating themselves. It would get bad but it will surely get better eventually. I’ll forever see him posted at his computer analyzing his beloved AI. I will miss his weekly conversations.
Will you be sending out credits for Real Wealth?
Your subscribers deserve to know what is the direction without Larry ???/
Jim Houtz
Forgive me if this is a stupid question but if the federal government restricts the use of cash, how will gold coins or bars be a practical alternative? Banks would probably be prohibited from exchanging cash for gold, and even the smallest denomination gold coin would be worth far more than the cost of groceries or gas. In a dystopian world, the seller would probably ‘keep the change’, leaving the buyer with a few bags of groceries or a tank of gas for which he paid over $1,000 in gold!
Government can mess anything up. It is true that all analogies and man-made rules find a place where they break down to new or different realities, but general principles remain forever. That said. Think barter/trade. … if you were buying a $40,000 or $50,000 truck would you rather carry 40 or 50 1 oz. gold rounds or bars to the dealer or nearly 40,000 or 50,000 dozens of eggs or 20,000 or 30,000 gallons of milk or thousands of chickens or hogs or cows or barrels of oil? And what would the proprietor be willing to receive? Any of these items may gain or lose relative value in the market, but one of these is more compact and has consistently been used as currency for trade for millennia. For smaller purchases consider smaller portions of gold or silver. I thought we once had a dime, a tenth of a ‘silver’ dollar. Each of these was about 90% silver content. Isn’t it interesting that this same money is now called junk silver and costs much more than the ten cents for a dime or 100 copper pennies for a dollar of a few decades ago? So much for thinking we are smarter than the founders who stated in our Constitution that money/currency would (only) be in silver and gold. But to your basic question, yes, you could pay in smaller portions of gold or silver and the other party could make change – if so inclined. And yes, the government can be destructive and you can’t control everything. You can deal with many things if you prepare.
And we will miss Larry. So sorry for his family and those close to him. His preparation before his departure is a big reminder and example to me as to what I need to be doing. May God bless his family and bring them peace in a difficult and sad time.
Stiglitz, Rogoff, etal…..haven’t we had enough of these worthless economists interfering with the free markets? Less than 5% of these buffoons predicted the 2008 recession and none are telling us when the next one will come. This profession has NEVER proven their worth.
And on another subject….RIP Larry. I always enjoyed your charting and other articles. I will miss you.
My thoughts are with the family of Larry and team money and markets. I used to regularly visit this site to read his articles. As a writer never afraid of speaking out his mind. Always with his AI charts for future guidance, just cant believe the news is true. I strongly feel Team Money and markets should have put an obituary for Larry Edelson. The way news was broken was is not a proper.
Sometimes we are dealt a hand in life that takes us by surprise, takes the wind out of our sails. We like to think we are prepared for anything. Then the rug gets pulled out from under us and we find out that we are not. When times are suddenly rough and certainly unexpected a little grace and kindness is in order. I’m sure things will mend in time. Larry prepared for this possibility better than most of the rest of us would. I didn’t know him personally, but I appreciated his writing and thinking. I wish I could have known him and learned more sooner. We all plug away at understanding what is coming at us in the marketplace. Some do a lot better than others. None of us is perfect. We listen. Or try to. We screen and consider ideas. We try to learn and prepare. We make mistakes. We try to learn from them and hopefully not repeat them. So, let’s have a little grace. And give this resource some time to recover. Larry made sure this could continue even if he could not.
Larry was one of the greats!
So sad to not hear more about a good man
My best to his family
RIP Larry. I will miss your commentaries and keen insight into the metals markets.