Observations from India’s Ban on Cash

On November 8, 2016,  India’s Prime Minister Narendra Modi announced that nation’s 500 and 1,000 rupee currency notes would become worthless overnight. Those notes were the largest notes used in circulation in the Indian economy.  This edict is absurd. As an American, it would be like hearing that your $20′s, $50′s and $100′s will become worthless at midnight tonight.

The lack of logistical planning is unconscionable, especially when you consider there are 1.25 billion people living in India! Literally every one of these people has been forced to run to the bank and deposit their currency before it becomes invalid. If you do a quick search on the internet, you’ll see videos where lines stretch thousands of people long.  There are lines where people wait days just to deposit their money at the bank! It’s madness!

On July 10, 2016 I wrote my prediction on negative interest rates. One of the keys to the colossal shift, is the banning of physical currency. I predicted physical cash would be banned in 5 or 10 years. I certainly did NOT expect it to be banned within 5 months! Nor did I expect a nation with 1.25 billion people, to be the pilot program for the war on cash!

So my observations….

1. People often use the term “systemic” risk to refer widespread risk to attributed to a few colossal banks, but I’ve never seen the term applied to a currency. As I watch India fall into chaos, I think there is clearly a systemic risk in the use of the rupee. Over a billion people had their lives wrecked overnight, simply because they all depended on the rupee. Had these billion people diversified their assets into other currencies (ie US dollar, Chinese Renminbi, or bullion), the consequences of Modi’s edict would of been benign. This event has caused incredible suffering to the entire nation. I therefore expect people will bear these scars for years. Confidence in the rupee will be weak for at least the next decade. Anyone in India who has the means to diversify their assets, will do so. There will be a renaissance of bartering too.

2. As of about an hour ago, it appears India is really shifting into a panic. There are nationwide protests. I think this whole debacle is going to send a shockwave of pain through the Indian economy for over a year. Smooth currencies are like oil for an engine. Without oil, things go bad really quickly. When you burn out the engine it takes a long time to fix it.

3. I also find it quite odd that most Americans are completely aloof to this disaster in India. Normally we hear about stuff in India, like when a train goes off the tracks. It’s a terrible event, but we hear about it in America. Yet the American media is mute over the entire Indian currency devaluation. This is a story impacting over a billion people! yet the American media doesn’t mention it? Even The Economist magazine glossed over the issue, which makes me question their judgement. Why is the American media ignoring such a massive news story?  Perhaps the American currency ban is closer than we think? Don’t be surprised, if you’re told that in 24 hours all paper money in America will become invalid. It just happened to 1.25 billion Indians, so it could surely happen to a mere 300 million Americans.

We shall see…

The Future of Negative Interest Rates and Helicopter Money

BY: MATT BYRON

Recently, the international banking world has been turned upside down with the concept of negative interest rates. The fact that this terms starts with the word “negative” makes it sound ominous. The fact that this is unprecedented and not understood also scares lot of people.

I’m intrigued by the concept, so for the benefit of my own personal investments I wanted to collect my observations and formulate my own macroeconomic theory.

First, my premises:

  1. Technological innovation is leading the world to abundance. Machines make it possible for us to grow crops and manufacture vast quantities of goods, with very little human labor. The end result is a leisure society which squanders it’s time on Facebook and watching television. Going forward, goods will continue to become better, cheaper, and faster than ever before. We will live in a world of even greater abundance.

  2. The world needs  a currency system because it facilitates specialization. For example, if a farmer wants to barter for a new computer the transaction would be very cumbersome. Afterall, how would a bushel of corn help the computer company which needs silicone?  Bartering is crude and archaic. Therefore, it behoves humanity to have a monetary system.

  3. Banks need governments to enforce laws and preserve order in society. Therefore, banks will always look after the interests of governments.

  4. Central banks create money from nothing. Some people bicker about GPD, national deficits, or nations going bankrupt. But these issues are moot.  Money is contrived and unlimited. Don’t be fooled by the ivy league MBA’s, expensive suites, esoteric vocabulary, and pretty charts. Money is just a giant game run by central banks.

  5. Society accepts money as being something of value, without ever questions it’s creation. Money will continue to have value, as long as the majority of the populations believes in it.

  6. The war on cash has commenced. Banks around the world are reducing the size of their largest printed bills. Governments around the world are equating cash payments with terrorism. It’s likely that in 5 or 10 years, physical cash will be completely eliminated from society.

  7. Governments around the world are notorious for squandering resources. Because they waste so much capital, they drive demand for goods and services that wouldn’t be need otherwise.

  8. Central banks are currently buying and will continue buying assets around the world to prop up investment prices. This is currently occurring in Japan and Europe.

So where does that bring us? Our society has an excess manufacturing capacity and an abundance of resources. So it behoves people to delay their purchases, which points to deflation. But if everyone in the world delays their purchasing, then the entire world financial economy would grind to a halt – which is bad. The central banks and governments of the world intend to remain relevant – that’s their goal.

Therefore, I foresee a confluence of key events. First, physical cash will become illegal. Holding physical cash is the easiest way to avoid the losses from negative interest rates on bank deposits. All money will be digital and you will be taxed ( by the bank or government) on your savings and income each year. We will see negative interest rates to levels we cannot fathom. Banks might lend at -3%, -5%, or even -10%. Those same banks might charge you -5%, -7%, -12% or more on your deposits. When all the money in the world is digital, you’ll have no choice but to pay for depositing you money.

Concurrently asset prices will rise, as central banks continue buying all the world’s assets. Bank of Japan already owns 52% of the entire Japanese ETF market. Central banks will drive up equities and real estate prices will increase. Central banks will corner every market.

Imagine a world, where your mortgage interest rate is -5%! It sounds absurd right? But just as absurd is the fact that money is contrived out of thin air by the banks. Therefore it’s possible.

Even though prices will increase, the governments will continue taxing real estate, equities and other assets. This taxation will keep governments in power and help them appear to still be relevant.  

As we see a surplus in the unemployed labor force, social welfare programs will be expanded. More money will be available for student loans, having a child, buying a house, or government health care.  Every person on the face of the earth might receive a basic life income of $500 or $1,000 per week. Keep in mind this is a digital currency, so you won’t be able to save it long (banks and the government will tax it every week). By dumping helicopter money on the public, the governments of the world will be spurring unneeded consumption (through boondoggles likes: wars, infrastructure projects, healthcare and college education financing). Additional boondoggles will include bailing out failed banks, corporations, and state governments.

Ultimately, we’re entering the ultimate era of leisure and free money. During this time we’ll see a “recession” every 7-10 years, created by the central bank, just to make it appear the marketplace is “free” and that money is “real”.

That’s just my theory…

I am NOT an investment professional. This blog is NOT intended to offer financial advice. 

My 10 Goals for Personal Environmental Responsibility

Businesses, non-profit organizations and government agencies often boast of their environmental goals. They claim things like “We plan to reduce our carbon emissions by 20% within 20 years.”

In many cases it’s debatable whether or not the goals of these organizations are genuine.  But what’s far more important, is that we set our own personal environmental goals. After all, how can we hold these groups accountable  if we don’t set goals for ourselves? Doesn’t it seem hypocritical and unreasonable? To paraphrase Ghandi, shouldn’t we be the change that we wish to see in the world? Rather than looks to others to change the world, let’s change it ourselves.

This epiphany has led me to create a series of environmental goals. I’ve listed them below. I hope they inspire you to make changes in your life too.

  1. To plant at least 10 fruit or nut trees each and every year for the rest of my life. To encourage other people to do the same.
  2. To consume less than 10 gallons of gasoline per month and to travel by bike whenever possible.
  3. To be self sufficient in my food production, water collection, and electrical use by the following percentages: 20% in 2014, 40% in 2015, 60% in 2016, 80% in 2017, and 100% in 2018.
  4. To hunt 50% of my own meat in 2013 and 100% of my own meat by the end of 2014. This will be a combination of deer, moose, wild turkey, and fish. To boycott all factory-farm animal products because of the unethical conditions and unknown consequences of the chemicals injections.
  5. To be active in an environmental group which plants fruit trees, nut trees, berry bushes, and other perennial sources of food.
  6. To support local businesses, when doing so reduces the net amount of fossil fuels/pollution used to create the products or services.
  7. To boycott all businesses which have disingenuous environmental goals. This means looking beyond the facades pushed by marking departments and understanding the true values of the business.
  8. To conserve my current resources and buy used goods whenever possible (this will reduce the need to manufacture new goods and will maximize the use of existing goods).
  9. To occupy 50% of my yard with fruit trees, nut trees, berry trees and perennial sources of food in 2014; and 100% of my yard with these plants by the end of 2015.
  10. To work in a career which makes environmentally conscious practices a top priority.

 

 

What’s on Your 2013 New Year’s Resolutions List?

2013 New Years Resolutions IdeasThe holiday season has kicked off, Christmas and Hanukkah are almost here! With New Year’s 2013 around the corner, it’s time for introspective thinking, identifying new goals in life and reflecting on your successes from 2012.

What will be your top goals in 2013? Do you have a list of 5, 10 or 100 goals for the New Year? It’s not important that you have a long list of goals. Rather, what’s important is that these goals are meaningful and that you write them on paper. As the Chinese proverb reminds us “The palest ink is better than the best memory.”

If you find yourself short of goals, focus on separate aspects of your life. Think about goals for your:  family, relationships, health, career, finances, benevolent interests and adventures.  If you need ideas, here’s an excerpt from my Top 100 Goals list.

It’s also important to reflect on your success of 2012. What were your top 5 or 10 accomplishments for the year?  Add these accomplishments to your Resume of Victories.  As you think back on your successes from 2012, ask yourself what made these successes possible? What events, connections, resources and actions, led you to success. This type of questioning will help you focus your energy efficiently.

I hope this gave you some great ideas for 2013. If you would like more inspirational ideas get my book on Amazon.com (I recommend the paperback version, so you can make notes and highlight important ideas).

I hope you enjoy the holidays and wish you continued success in 2013!

The Motivational Book: Live Your Dreams

Live Your Dreams: Powerful Strategies For Attaining Your Greatest Goals

How do you refuel your mind? Are you motivated by movies, music or books?

I have always found inspiration in all of those media, especially in great books. They’ve given me the energy to bust through barriers and charge great goals relentlessly.

Over the years I’ve kept notes of: the most important life lessons I’ve learned, the most powerful quotes I’ve read, and the most effective strategies for attaining goals. These are the tips that motivate me, and I share them with my clients. Now, I’ve put these tips into writing in my new book Live Your Dreams, Powerful Strategies For Attaining Your Greatest Goals.  The book is packed with exciting parables, clear strategies, and creative ideas.

It’s scheduled for release later this month. If you’re looking for some motivation, grab a copy on Amazon.com or Kindle.  I hope you enjoy it!