Copyright 2012 by John T. Reed

After reading how important it was to have foreign currency when your own country’s currency hyperinflates, I started moving my rainy day savings overseas and urged my readers to do the same. If you read those articles, some of the phraseology in the 5/21/12 Wall Street Journal article titled “Europe Banks Fear a Flight” should sound familiar to you.

…customers withdrew 700 million euros from Greek banks in a single day.

If Greece leaves the euro zone, it will almost certainly restrict bank customers from moving their money out of the country.

That is another way to word what I have been saying: when a nation can no longer borrow the money to deficit spend, it almost always “prints” it. That causes hyperinflation. In order for hyperinflation to work for the government that causes it, they have to also simultaneously enact the following laws:

A. wage, price, and rent controls

B. capital controls (prohibition against possessing, using, importing, exporting foreign currency or gold, in other words, forcing everyone in America to keep all their money in U.S. dollars)

They then might preemptively transfer their funds out of their countries in order to avoid having their savings converted into rapidly devalued Spanish pesetas and Portuguese escudos.

That is precisely what I have been doing and urged you my readers to do. If your money is still in the U.S. when hyperinflation hits, the U.S. government will almost certainly order all U.S. banks not to transfer any money out of the U.S. and to covert any U.S. accounts in foreign currency into U.S. dollars at a below-market conversion rate. In other words, as the purchasing power of the U.S. dollar plummets and depositors scream to get their money out and buy foreign currencies with it, the U.S. government will outlaw doing just that. That is what Greeks fear—totally correctly—that the Greek government will do to them when they leave the euro. The Greek government will do that and so will the U.S. government. All governments that hyperinflate their currencies have to do that or the hyperinflation will not accomplish its purpose: making it easy for the government to pay its bills.

…large portions of bank deposits in Spain, Portugal, and Italy can be withdrawn at virtually a moment’s notice. There is little to stop anxious customers from transferring their savings from a bank in one EU country to a bank elsewhere in the 27-country bloc.

Yes, and large portions of bank deposits in the U.S. can—at present—be withdrawn at virtually a moment’s notice. You should transfer your rainy-day savings money to the most well-managed, non-euro, currencies in the OECD. In particular, I recommend Australia, Canada, New Zealand, and Switzerland.

You can still buy foreign currencies, but there is almost certainly a day in the near future when you will hear on the media that you no longer can. By federal law, you will be imprisoned in the U.S. dollar while its purchasing power plummets to zero. If you delay getting out of the U.S. dollar and U.S. banks, which will put you back into the U.S. dollar forcibly once the hyperinflation takes hold, you will kick yourself until the day you die.

John T. Reed