by Bob Stokes
Updated: April 28, 2017
Cash is the one asset that is almost sure to rise in value during a deflationary period. Yet, the "war on cash" has been escalating. Here's why you should start storing away plenty of cash.
[Editor's Note: The text version of the story is below.]
In a "buy / sell" transaction, place a "Benjamin" in someone's palm, and that person knows he or she has $100, no ifs, ands or buts about it.
Cash doesn't "bounce" or have fees like credit cards. Put simply, people like cash.
But did you know that there's been a "war on cash"? Here's what our July 2013 Elliott Wave Theorist said:
Authorities don't want you to have cash, because it means you're not propping up debt. Mises Daily has been reporting on a silent "war on cash" in some parts of Europe. Sweden, Norway and France are restricting the use of cash.
Our February 2017 Elliott Wave Financial Forecast provided an update:
Many cities have become literally cashless. In London, for instance, buses as well as many shops and cafes refuse to handle paper currency and coins. "Cities big and small are at the forefront of a global drive to go digital," says The Guardian [UK]. ... India declared a "war on cash" in November. In an effort to flush out the paper, the government replaced 500- and 1000-rupee notes.
And now, Reuters says (April 26):
Cash-loving Germans ... have been concerned that a move by the European Central Bank to phase out the 500 euro note by the end of next year is the start of a slippery slope.
Even before the "war on cash" escalated to its current level, we suggested that safety-minded investors store away significant sums of cash.
It's the one asset that is almost sure to rise in value during a deflationary depression. The idea of such an event might seem far-fetched with stocks indices near all-time highs. But, remember, Japan was riding high financially in the 1980s just before the start of a deflationary period in the early '90s that Japan is still grappling with today.
Review these charts and commentary from Prechter's Conquer the Crash, a book that first published in 2002:
Now let's dispose of the idea that the return on cash is "low." How would you like to own an asset that goes up four times in value in eleven years? The chart on the left is a picture of the soaring value of cash in Japan from 1990 through 2001. Cash has appreciated 300 percent in eleven years in terms of how many shares of Japanese stocks it can buy. The chart on the right is one picture of the rising value of cash in the United States, which appreciated nearly 250 percent from March 2000 [through early 2002] in terms of how many shares of the NASDAQ index it can buy.
In our view, now is the time to start preparing for the next inevitable downturn, when your cash can buy shares at much cheaper prices.
We're now telling subscribers how we expect the stock market to perform in the near-, intermediate- and long-term.