Executive Summary

• Is it better to hold cash in savings/checking accounts, or securities accounts?
• Where will the dollar likely from here?
• What will likely happen with retirement accounts?
• Ways to diversify your cash risk

If you have not yet read Part 1: The Cardinal Sin Of Investing: Permanent Impairment Of Capital available free to all readers, please click here to read it first.

The Role Of Cash In The Informal Economy

In stagnating formal economies burdened by over-regulation, high taxes and financialization, one of the few bright spots for employment and entrepreneurism is the informal or cash economy.  The more stultified and elite-dominated the economy, the larger and more vibrant the informal economy.  In some highly regulated, high-tax European nations, up to 30% of the economic activity is underground/cash.

The elimination of central bank currency will not eliminate the informal economy. Rather, the participants in this sector will adopt non-central bank issued forms of cash—precious metals, coins, other nations’ paper money, perhaps even digital currencies such as bitcoin or its gold-linked cousins (Bitgold, etc.)

Those with little income often do not have bank accounts, as the fees are costly. Eliminating cash will hit the poor who earn money in the informal economy especially hard. Though the poor are essentially powerless in our influence-is-auctioned-to-the-highest-bidder system, this could change once the working poor who benefit from the cash economy are pushed even deeper into poverty by the banning of cash. That might spark political blowback that could cross political lines, as libertarians and leftists alike might rise to the defense of those who depend on cash and the informal economy.

US Dollar Hegemony Is Partly Based On Physical Cash

One of the reasons I have been a US dollar Bull for the past four years is the global hegemony of the USD. The ubiquity of physical dollars is a key part of this global hegemony. A $100 bill buys not just illegal drugs but medications, transportation, meals and accommodations just about anywhere on Earth. (USD bills that have been protected in sealed plastic bags retain their value in humid tropical nations such as Myanmar and Cambodia.)

Eliminating cash USD would deal a potentially mortal blow to USD hegemony, and for this reason I expect some elements of the Deep State will resist the elimination of cash.