“Should I take my savings out of the bank?”
Last week, a member of my editorial staff at our headquarters in Delray Beach, Florida got an urgent call from her grandmother in Argentina.
On September 2, the Argentine government imposed capital controls restricting dollar purchases. The new measures limit purchases or transfers of more than $10,000 per month.
The central bank says it won’t hinder people from withdrawing money from their accounts. But Argentines don’t trust the government—and for good reason…
In the crises of 1989–1990 and 2001–2002, the government blocked citizens from withdrawing their savings. The second time around, riots broke out. Supermarkets were looted, and angry depositors vandalized bank ATMs.
That’s why hundreds lined up at banks across Buenos Aires last week. They wanted to withdraw their savings after the latest government-authorized currency controls.
And they’re not taking any chances. Here’s what 25-year-old college student and part-time worker, Catalina Pedace, told Reuters:
This is a time when we are getting a lot of surprises. Tomorrow, we might wake up and see that everything has changed. I prefer to be cautious and not regret it later.
Now, I’ve been warning my readers for weeks that we’re about to enter a global currency crisis. I call it the “Great Unwinding”…
Even though we’ve never had a situation where all global currencies got crushed at once… I believe a broad-based currency meltdown is in the offing.
And today, I’ll share why savers need to adopt a new paradigm to survive the implosion of fiat currencies…
A $69 Trillion Debt Bomb
The current economic crisis in Argentina was triggered last month when the opposition candidate defeated President Mauricio Macri in a primary election.
That result spooked investors, who feared a return of interventionist policies. The main Argentine stock market crashed more than 30%—in one day.
The Argentine peso collapsed over 25% (and continues to fall). To keep it afloat, the government announced the new capital controls. And that’s why my colleague’s grandmother is considering withdrawing her savings.
But emerging market currencies aren’t just facing political uncertainty. The main problem is debt…
Total emerging market debt has tripled since 2007—and now stands at $69 trillion. (Just last year, Argentina took out an emergency $56 billion loan from the International Monetary Fund to cover its short-term debt.)
To make matters worse, many of these loans must be paid back in U.S. dollars. And as the dollar rises, their currencies get weaker. So the loans are more expensive to service.
Now, emerging markets need to pay back (or refinance) $1.5 trillion in debt over the next 18 months. But guess what? They don’t have the money.
Countries are issuing debt they can’t service—and printing too much money to try to cover it. Nothing kills a currency faster than that.
Of course, I’m not saying we’ll see a similar currency collapse in the U.S. But the Fed’s money-printing is eroding the dollar’s value. And like many other nations, the U.S. is also drowning in debt—to the tune of $22 trillion.
The economic effects of the Great Unwinding might not be as dramatic in the U.S. and other Western nations as they are in Argentina. But friends, hear me out when I say we’re entering a stage where currency devaluations will eat away at your savings.
So you need to prepare yourself now…
The New Paradigm
I’ve said it before, and I’ll say it again: A new narrative is emerging. And it’s, “Oh my goodness, the spaghetti just hit the fan all over the world.”
You might say, “Teeka, you’re crazy… We’ve never seen a global currency devaluation in our lifetimes. You’re nuts.”
But we’d never seen negative interest rates before, either. Yet now, about $17 trillion worth of government bonds worldwide (25% of the market) trade at negative yields.
Think about that. Lenders are actually paying borrowers. That’s insane.
So it’s possible we’ll see the world’s currency bubble pop. And when it does, investors will look elsewhere for alternatives—like bitcoin.
Without getting into the weeds, no individual person runs the bitcoin blockchain. It’s peer-to-peer, with no intermediary. So governments can’t shut it down. They can’t confiscate or put controls on it.
Even China—with one of the more repressive governments in the world—has tried to ban bitcoin. Yet trading still flourishes there. Russia, Vietnam, and Colombia have all tried and failed, too.
For those who have lived through several currency devaluations (like Argentines), bitcoin is a substitute to putting their money in banks. In fact, they’re willing to pay a $1,000 premium or more for bitcoin.
The government can stop them from buying U.S. dollars… But it can’t stop them from buying bitcoin. Even with bitcoin’s wild volatility, they’d rather have 20% of something than 100% of nothing.
Now, if you’re from a country with an established fiat currency, you probably won’t place your savings into a volatile asset like bitcoin. But consider a small stake; it could turn into life-changing gains as the Great Unwinding unfolds.
Central banks can paper over problems for a very long time—but not forever. At some point, the fiat currency bubble will burst.
And when it does, bitcoin and altcoins will soar.
Let the Game Come to You!
Editor, Palm Beach Daily
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