Reasons to own precious metals continue to grow

Imagine that in 2005 you told your peers and colleagues about some of the events that we would witness in the next decade. That Lehman Brothers and Bear Stearns would no longer exist. That the Federal Reserve’s balance sheet would be almost $3 trillion. That the Nikkei would rise by over 40% as the Japanese government sought to trash the yen. You would have likely lost most of your credibility. The latest debacle is the EU attempting to directly confiscate money out of Cyprus depositor accounts. It is a startling development and further indication that we are reaching another 2008-style crisis point. The importance of owning physical gold and silver should be obvious.

The recent developments in Cyprus are just the latest in a series of events that sound more like a science fiction novel than free market economics. If the proposed EU/IMF plan goes through successfully, is there really much difference between this action and what MF Global did with its client’s money in late 2011?

Ironically, one can make the argument that this is actually more honest than what central banks have previously been doing. Unlike the inflation financing policies currently in place, at least the proposed tax is being clearly proposed to the public. However the net effect is the same, as both actions rob savers of their purchasing power. Once again banks and governments have made bad bets and overspent, and the public is being used to make up the difference.

The deal calls for some of the money to be drawn from unsecured (€100,000+) depositor accounts with the ECB and IMF providing a little over 40% of the entire €10bn bailout package.

In addition to having a percentage of your wealth expropriated, the part that remains is also losing value as well while the currency is inflated. It is an all around terrible deal for anyone who tried to make the conservative choice by putting their money in a supposedly safe bank.

Even more significant is the precedent that it sets. It highlights just how arbitrary the entire eurozone decision making process has become. If this can happen in Cyprus what is to prevent the eurozone from using the same strategy in Spain, Italy, Greece, or Portugal? There has never been a more important time to take your assets out of the traditional currencies and banking systems.