Eagle 1

One allegation is that when you go to the bank with your currency to exchange it, you will be required to have your purchase receipt(s) or the bank will refuse to exchange it for you.

I addressed this allegation with our personal banker at WF some time back when it first began to crop up. She said that having the receipt is not a bank requirement. The bank does not care when you purchased the currency.

What they are interested in is authenticating it. Although our local WF branch does not yet have a De La Rue machine, the personal banker said she can authenticate the currency easily with some simple procedures she has been taught.

One private WF banker who is in the midst of getting a new De La Rue machine installed said that this is a programmable machine (large and verrry spendy!) that will accept multiple currencies and bills of different sizes.

Some branches will use the smaller desktop machines which are pre-programmed and sized for either Dinar, or Dong, or Rupiah, or whatever currency.

To get back to the question of the purchase receipts, it is advisable for you to hang onto your receipts, but you will only need them if you need to prove to the IRS when the currency was purchased for possible tax purposes.

What I’ve been told by a US Treasury employee is that at the moment there are no taxes on currency exchanges, but that there are several bills which have been proposed which could become retroactive. 

You could pay anywhere from 15 to 20% in taxes (and one rumor has it at 23.8%). For that reason, I have recommended to folks that they set aside anywhere from 15 – 25% of their exchange in a separate account and hold onto it until we all see where this tax issue shakes out.

Della and I regularly travel back and forth to Canada, and when we do we exchange USD for CAD (usually before we leave). When we return and exchange back into USD, the bank does not ask us for a receipt.

By the same token if we do an exchange from USD to CAD at the Royal Bank of Canada, for example, the RBC teller does not ask us for a receipt of where we got our USD; and similarly when we return, if we obtained our currency in Canada, the local bank does not ask for a receipt of purchase for our CAD, no matter how much we exchange!

The same holds true for friends who travel abroad, to Israel, for example. All the bank has to do is authenticate the currency to ensure that it is not counterfeit.

Much has been bandied about concerning FINCEN Form 104. There are conflicting reports concerning whether it will be necessary to fill out one of these forms when we do our exchanges. If you take your currency to Ali, for example, at Dinar Trade, he has said (in times past anyway) that you must fill out one of these forms. I would suggest that if you do your exchange with a broker, you should be prepared to fill out one of these forms.

If you exchange at the bank, our personal banker says that she is not aware of any requirement for either her or us to fill out one of these forms.

My best guess here is that if you have a relationship with the bank and/or a personal banker that is fairly well established, and there are no questions about your activities or personal character, no requirement will be made to fill out a form.

If, on the other hand, you are a stranger to the bank or institution where you want to exchange, you probably should be prepared to fill out the FINCEN Form 104 (or whatever new form the IRS has to replace it).

Let me change subjects for a minute.

Based on multiple reports, it appears that Treasury Secretary Jack Lew will be making an announcement either late Sunday or early Monday concerning the new “gold-backed” USD. 

Unless I miss my guess, the focus of this announcement will be on the asset-backing of the USD with a heavy focus on gold despite the fact that our new dollar will only be fractionally backed by gold.

Much, if not most, of the backing will be in the form of other metals, minerals and natural resources such as oil and natural gas; and this will be pursuant to an announcement made by Christine Lagarde at the IMF a few weeks ago in which she noted that countries could use in-ground reserves of natural resources, along with gold, silver, platinum and other precious metals as the asset-support for their currencies.

I will be surprised if there is any mention of the fact that the USD is due to take a 30% hit in its value against the basket of currencies on Monday.

This devaluation has already been being factored in by other countries, and most of you (I’m sure) have already seen and experienced this factoring-in when you have gone to the grocery store or purchased goods manufactured or imported from other countries.

In any case, prepare to see an increase in the weeks to come in the cost of goods purchased from other countries — especially those countries whose currencies have revalued against the USD.

My personal assessment (as well as that of a number of economists) is that the sudden 30% hit against the USD will cause investors who are holding USD-denominated assets (such as treasuries and bonds) to dump those assets, further devaluing the US Dollar.

That could result in an additional loss of 20% or more before the panic subsides and folks regain their confidence in the dollar. If you have the ability to do so, watch for the USD to bottom out and then re-invest in it. You could do quite well for yourself.

That said, I continue to encourage folks to hold onto as much of your IQD as possible until we see where this devaluation shakes out and where the IQD, the VND and the IDR stand against the USD.

The IQD is the only fully gold-backed currency in the world. It will hold its own against the dollar, and increase as the dollar drops.

That’s my nickel’s worth for the day.

Blessings on you.

Eagle1