Category: simonblack

December 10, 2014
Santiago, Chile

When Karl Marx wrote about the bourgeoisie as the “unproductive class” he was writing from personal experience.

The foremost champion of the proletariat, Marx never actually belonged to the working class himself.

Born into a well-off middle-class family, Marx ascended up the social hierarchy by marrying into Prussian aristocracy.

Seven kids later, a lavish lifestyle, and an unwillingness to hold down a job, he found himself deeply in debt, only to be saved by the generosity of his friend Friederich Engels.

Engels found Marx’s ideology so amusing he offered to pay off his friend’s debts AND give him an annual stipend of £350.

That may sound like a paltry figure in today’s terms, but at the time, this was a sizeable sum.

Back then Britain was on the gold standard, meaning that those paper notes were attached to something with weightier value.

The price of an ounce of gold at the time was fixed at £4.24.

So in gold terms, Marx was offered a lush 82.55 ounces of gold per year. And back then, you could actually redeem paper currency for gold.

So while £350 doesn’t even register a week’s wages anymore, the 82.55 ounces of gold that Marx’s stipend was worth is valued at nearly $100,000 per year in today’s money.

(I wonder if the Occupy movement would have included him amongst their ranks, given that this salary nearly puts him in the top 1% at the time)

As Marx ironically shows, paper does not stand the test of time. Gold does.

This of course defies mainstream thinking. We should all feel excited and privileged to hold paper. We’re told that gold is a barbarous relic.

Ben Bernanke once told Congress that he doesn’t “pretend to understand gold prices.”

There’s not really much to understand. Are your pieces of paper really going to be worth anything 150 years from now? Probably not.

If you want your savings and wealth to actually hold value over the long-term, follow the example from the father of communism and enemy of private property: own some gold.

And then to really be sure it gets to your grandkids, check out where are the safest places in the world to store your gold offshore.

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December 9, 2014
Santiago, Chile

In the moment after the musicians finished their last song, the silence was broken by the faint tune of someone singing “Mu isamaa on minu arm”.

The singers on stage quickly looked at each other nervously, but seeing strength in each other’s eyes they began to join in.

The year was 1969, and the Soviet leadership that held control over Estonia had banned this patriotic song. Singing it was a crime.

Yet an entire crowd of people defied the secret police and sang it anyway, sparking a peaceful rebellion against an oppressive system.

This seems to be the Estonian way. And today the country is making another unique stand against the existing system.

This time rather than fighting against Soviet domination, they are rebelling against the anti-business, anti-freedom policies of governments across the world.

Doing what has never been done before, the Estonian government has recently introduced an “e-residency” program for foreigners.

The idea is to enable people from around the world to very simply establish a unique digital presence in the country, and then carry the benefits of that with them wherever they go in the world.

E-residency is not the same as traditional residency. We’re not talking about actually moving to Estonia.

But the government there understands that in today’s world, geography is not particularly relevant.

We all have digital personas with which we transact business and engage with one another. So what if your ‘digital self’ could actually ‘live’ somewhere and have rights, privileges, and benefits?

That’s precisely what Estonia’s government is trying to do.

E-residents are issued a digital card that allows the holders to do things like:

• Register an Estonian business online in minutes
• Operate your Estonian company overseas via the Internet (e.g filing taxes, doing 
accounting, signing papers)
• Open an Estonian bank account and use it online (banking is great in Estonia, with a number of banks offering “Startup Packages”, immediate payment processing, and with worldwide wires costing only 6 euros)
• Sign contracts online by using a digital signature.

Given that corporate income taxes for undistributed profits in Estonia are zero, this is a massive perk to any entrepreneur or anyone interested in diversifying where they bank and source their income.

Estonia wants to make it easy for you to start your business and make money.

At the moment, to apply for the e-residency you need to go to Estonia in person. The whole process takes less than two weeks and costs just 50 euros.

But starting in 2015, you’ll be able to submit your application for e-residency at any Estonian embassy or consulate around the world.

This is a trend we’re seeing play out with increasing regularity.

The current system is based on racking up massive amounts of debt, conjuring money out of thin air, and coercing people with big militaries to use it.

Today the antique nations of the Western hierarchy (primarily the US and Western Europe) do everything they can to drive away talent, productive businesses, and innovation.

They create Byzantine regulations, excessive bureaucracy, and punitive taxes.

But that system is on the way out.

The new system breaks down borders. Geography becomes less relevant.

And governments are actually forced to compete with one another to attract talented residents and businesses.

That’s the future. And it’s already happening.

Panama, for example, has a fantastic program called the “Friendly Nations Visa” whereby people from dozens of countries can obtain residency quickly and easily.

Here in Chile, almost any foreigner can obtain instant permission to work.

Across Asia, in places like Malaysia and the Philippines, governments have created programs to attract retirees.

And even in bankrupt Europe, governments have created special tax incentives for foreign investors to mop up all of the excess housing liquidity in places like Spain, Greece, and Portugal.

Despite the accelerated onslaught on freedom and opportunity across the Western world, there are places that recognize they have to compete for the best and are following up with action.

Estonia is really taking things to the next level with e-residency, and it’s an encouraging sign of where this trend is headed over the long-term.

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December 9, 2014
Santiago, Chile

When Gregor MacGregor returned to London he was a real celebrity.

He had just come back from the New World, where he had a number of successful exploits fighting in the South American struggle for independence and was made the Major-General of the Venezuelan republican army by Simon Bolivar—the leader of Latin America’s independence movement.

From within the dinge of Britain, the New World seemed like the land of both sunshine and wealth.

A number of Latin American countries were gaining independence at the time, and investors were frantically trying to get in early to capitalize on the opportunities overseas. The was the first emerging markets frenzy among investors.

When MacGregor, from his first-hand experiences there, told people of the new country of Poyais—where the climate was mild, the natives were friendly, the water pure, and the land fertile and abundant with high-quality timber—it seemed like there could be no better investment.

So in 1822, when he offered a £200,000 Poyais bond at 6%—twice the rate that British government bonds were going for at the time—who could resist?

It didn’t matter that the government of Poyais had no record of collecting taxes nor did it have any systems in place to raise revenue. The bonds would be easily paid back through export-taxes on the resources being shipped back to Europe.

It didn’t matter that the country had not been developed. There were hundreds of people signing up to build up the settlement there.

It didn’t even matter that the country didn’t actually exist.

The bonds were quickly sold and seven ships of people set out for this land of false promises.

The swindle inevitably came to light a few months later, though initially from a decline in confidence over Latin America as a whole rather than the discovery of Poyais’ non-existence.

And as the value of the fraudulent bonds plummeted, MacGregor simply skipped town to Paris, where he implemented the same scheme yet again.

In total, selling bonds for this fake country he made up he was able to raise £1.3 million, which in terms of the size of the British economy, is comparable to about £3.6 billion today.

Thousands of people lost all of their money believing in his well-orchestrated scheme, and some even lost their lives trying to find this land of opportunity to settle.

Though the country is very real, the US government’s ability to repay its bonds is just as fictional as that of Poyais.

The amount of debt it has accumulated has just surpassed the $18 trillion mark, which no level of taxation or economic growth could ever pay off.

And given that Treasury yields are below even the government’s own official rate of inflation, investing in US debt means not only will you not make money in the future, but you’re also losing money by the day.

This is hands down the worst investment out there, yet so many still pile their money into it.

Just as the Poyais’ scheme was unraveled by skepticism of Latin American bonds overall, the spark that turns the trust of US government finances into dust can come from a decline in confidence anywhere in the system.

You could easily brand the hopeful investors and settlers of Poyais as gullible. And there was a clear information mismatch and a lot of unknowns that fraudulent peddlers like MacGregor could take advantage of.

But loaning money on losing terms to the biggest debtor in history that has practically no mathematical chance of ever repaying it today – when all the facts are out there for everyone to see – is a much bigger insult to reason.

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December 8, 2014
London, England

[Editor’s note: This letter was written by Tim Price, London-based wealth manager and editor of Price Value International.]

You can be for gold, or you can be for paper, but you cannot possibly be for both. It may soon be time to take a stand.

The arguments in favour of gold are well known. Yet they are widely ignored by the paperbugs, who have a curious belief system given that its end product (paper currency) is destined to fail. We just do not know precisely when.

The price of gold is weakly correlated to other prices in financial markets, as the last three years have clearly demonstrated.

Indeed gold may be the only asset whose price is being suppressed by the monetary authorities, as opposed to those sundry instruments whose prices are being just as artificially inflated to offer the illusion of health in the financial system (stocks and bonds being the primary financial victims).

Beware appearances in an unhinged financial system, because they can be dangerously deceptive.

It is quite easy to manipulate the paper price of gold on a financial futures exchange if you never have to make delivery of the physical asset and are content to play games with paper.

At some point that will change.

Contrary to popular belief, gold is supremely liquid, though its supply is not inexhaustible.

It is no-one’s liability – this aspect may be one of the most crucial in the months to come, as and when investors learn to start fearing counterparty risk all over again.

Gold offers a degree of protection against uncertainty. And unlike paper money, there are fundamental and finite limits to its creation and supply.

What protection? There is, of course, one argument against gold that seems to trump all others and blares loudly to skeptical ears.

Its price in US dollars has recently fallen. Not in rubles, and not perhaps in yen, of course, but certainly in US dollars.

Perhaps gold is really a currency, then, as opposed to a tiresome commodity? But the belief system of the paperbug dies hard.

The curious might ask why so many central banks are busily repatriating their gold? Or why so any Asian central banks are busily accumulating it?

It is surely not just, in Ben Bernanke’s weasel words, tradition?

If you plot the assets of central banks against the gold price, you see a more or less perfect fit going back at least to 2002.

It is almost as if gold were linked in some way to money. That correlative trend for some reason broke down in 2012 and has yet to re-emerge.

We think it will return, because 6,000 years of human history weigh heavily in its favour.

Or you can put your faith in paper. History, however, would not recommend it. Fiat money has a 100% failure rate.

Please note that we are not advocating gold to the exclusion of all else within the context of a balanced investment portfolio.

There is a role for objectively creditworthy debt, especially if deflation really does take hold – it’s just that the provision of objectively creditworthy bonds in a global debt bubble is now vanishingly small.

There is a role for listed businesses run by principled, decent management, where the market’s assessment of value for those businesses sits comfortably below those businesses’ intrinsic worth.

But you need to look far and wide for such opportunities, because six years of central and commercial banks playing games with paper have made many stock markets thoroughly unattractive to the discerning value investor.

We suggest looking in Asia.

As investors we are all trapped within a horrifying bubble. We must play the hand we’ve been dealt, however bad it is.

But there are now growing signs of end-of-bubble instability. The system does not appear remotely sound.

Since political vision in Europe, in particular, is clearly absent, the field has been left to central bankers to run amok.

The only question we cannot answer is: precisely when does the centre fail?

The correct response is to recall the words of the famed value investor Peter Cundill, when he confided in his diary:

“The most important attribute for success in value investing is patience, patience, and more patience. THE MAJORITY OF INVESTORS DO NOT POSSESS THIS CHARACTERISTIC.”

But the absence of patience by the majority of investors is fine, because it leaves more money on the table for the rest of us.

The only question remaining is: in what exact form should we hold that money?

Be patient. And consider the words of James Grant from his quietly passionate and wonderfully articulate Cato Institute speech:

“What will futurity make of the Ph.D. standard? Likely, it will be even more baffled than we are. Imagine trying to explain the present-day arrangements to your 20-something grandchild a couple of decades hence – after the Crash of, say, 2016, that wiped out the youngster’s inheritance and provoked a central bank response so heavy-handed as to shatter the confidence even of Wall Street in the Federal Reserve’s methods.

“I expect you’ll wind up saying something like this: “My generation gave former tenured economics professors discretionary authority to fabricate money and to fix interest rates. We put the cart of asset prices before the horse of enterprise. We entertained the fantasy that high asset prices made for prosperity, rather than the other way around. We actually worked to foster inflation, which we called ‘price stability’ (this was on the eve of the hyperinflation of 2017). We seem to have miscalculated.”

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December 5, 2014
Santiago, Chile

It seems rather appropriate that just seven days after the US government hit a whopping $18 trillion in debt, mainstream financial media has picked up the IMF’s recent World Economic Outlook report, which puts the US economy as #2 in the world.

There’s no shortage of ostriches out there who come up with every reason in the world why this doesn’t matter.

They say, ‘oh the IMF is just reporting purchasing power parity.’ Or, ‘oh it’s the per capita GDP that it counts.’

But the obvious truth is that the US is in decline. And it’s being overtaken.

1,000 years ago when Europe was just a tribal backwater with local warlords duking it out over salt mines, Asia was the center of wealth, power and civilization.

China continued to be the largest economy in the world up through 1870.

That changed. The West overtook the East in terms of power and influence and it remained that way for centuries.

Now things are changing once again. The West, and the US in particular, is plagued by:

Insane debt levels, which the government has been accumulating at faster and faster rates, hitting an unprecedented $18 trillion in debt this past week.

Short-sighted monetary policy, from quantitative easing that has debased the currency to negative interest rates that have wiped out any reason to be smart with money.

A crippled economy, as Western nations’ oppressive taxation frightens away the productive, and handouts have created a society of dependency.

Global bullying, as the US spies on its own citizens and allies, compelling businesses and governments to terminate their relationships with the Land of the Free.

Waging endless wars, whether against nouns (‘terrorism’), plants (‘drugs’), and brown people on the other side of the planet who supposedly hate us for our freedom. If they only knew…

A population that lives in fear, as you are more likely to get shot by your own police in the United States today than to ever even see a terrorist.

It’s pretty hard to maintain the top spot when that’s what you stand for.

China obviously has its own substantial problems, but over the last several decades one thing is for certain—China (and Asia in general) is a place where production and savings are valued.

The universal law of wealth is to produce more than you consume. The West has completely broken that.

They’re trying to replace it with debt, war and intimidation. And we’re now only just starting to scratch the surface of the consequences that this brings.

History shows that every time this happens, governments in power will do anything they can to maintain the status quo and keep the party going just a little bit longer.

Do you have an obligation, simply by an accident of birth, to go down with the sinking ship?

Do you owe desperate politicians a greater share of your livelihood so they can blow it on even more war, police and spying?

Or is your primary obligation to your family and your loved ones?

The truth is that all the tools and all the resources exist to disconnect from this economic Hindenburg.

You can choose to either be an unwilling participant in its continued unraveling. Or, to be a curious spectator, having take steps to protect what you’ve worked your entire life to build. The choice is yours.

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See also how the Japanese government has backed itself into a corner. There’s no way out. It’s game over, Japan.

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December 5, 2014
Santiago, Chile

Making up the highest stratosphere in Japanese society, the samurai had quite a reputation to uphold.

Beyond honor and loyalty, they had to keep up appearances by wearing only the highest quality clothing and by being seen in only the best establishments.

The samurai image did not come cheap, often requiring more than their simple stipends could afford.

Thus it became quite common for samurai during the Tokugawa period to rack up large debts from merchant lenders in order to fund the lifestyles that were expected of them.

If a samurai didn’t feel like paying off those debts, however, he could simply have them slashed, with the merchants taking the hit.

The courts didn’t care about the merchants. They were at the bottom of the social hierarchy, and their profit-making activities were not nearly as noble as those of the samurai.

While merchants suffered due to a lack of respect for their activities, peasants suffered in spite of great respect for theirs. Held in high regard as the true producers in society, they were honored by bearing almost the entire population’s tax burden.

This system, where the productive were continually punished, simply couldn’t last. And it didn’t, with the Tokugawa shogunate brought to an end with the Meiji Restoration in 1868.

Yet these lessons have quickly been forgotten, as nearly 150 years later, the same unsustainable practices continue to plague Japan.

The disdain for the productive class is apparent in the heavy taxation of businesses and individuals, while public sector debt has ballooned to well more than double the size of the entire economy.

And just as the samurai escaped paying their bills before, the tradition of screwing over creditors continues today.

The stated amount of the debt might not be slashed, but as the government prints money to repay their creditors, the value of what they repay is worth increasingly less.

Shirking on debt is now an institutionalized part of the system. Today the Japanese government doesn’t just admit to having inflation, it’s one of its key objectives in order to stay afloat.

The Japanese government is walking on a sword’s edge, though. On one hand they need inflation to be able to keep the debt repayments going, but on the other, by pushing for higher inflation they’re inevitably pushing for higher interest rates as well—meaning higher debt payments.

They’ve backed themselves into a corner.

This system clearly has an expiration date, one that’s long past due.

As it is, over 25% of Japan’s tax revenue goes towards just the INTEREST on the debt.

Remember, the late Ottoman Empire’s fiscal situation spiraled out of control just in a matter of years, to the point when they were paying 52% of their tax revenue just to pay interest on the debt in 1877. And at that point they were finished. They defaulted that year.

In April, the Japanese government raised the sales tax rate from 5% to 8%, which while doing nothing for the government’s ability to cover debt payments, did significant damage on the country’s growth in terms of GDP.

Clearly that didn’t work out very well, so they’re postponing the planned second increase in the sales tax.

But by doing that, the country’s credit rating was promptly downgraded by Moody’s.

While it’s astonishing that Japan’s rating is still as high as it is, the shift downwards is critical.

This is the beginning of the end. The Japanese government is running out of moves. If they raise taxes, they lose growth; if they don’t, they lose the last remaining shred of confidence from investors that they’ll ever make good on their debt.

Game over, Japan. Hara-kiri seems to be the only option at this point.

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December 4, 2014
Santiago, Chile

One of the great myths about investing that we’re told by the mainstream investment education is that we should “buy and hold” for the long term.

I remember being taught in a personal finance class long ago that I should just buy the S&P 500 index, walk away, and that years later I will have achieved huge gains.

The premise is that over a long period of time, it doesn’t really matter at what point you get in and out. The long-term trend of the stock market portends that you will make money.

It’s those kinds of investing myths that become axiomatic through repetition. You keep hearing the same thing over and over again and pretty soon people believe it.

Let’s look at the data.

It’s true that stock markets have plenty of peaks and troughs. Going back to the last relative peak, the Dow Jones Industrial Average (DJIA) hit just over 14,000 in October 2007; back then this was an all-time high.

If you had bought the DJIA back then, your return on the increase in share prices through today would work out to be a measly 3.5% on an annualized basis.

If you adjust that for taxes and inflation (even using the government’s own monkey numbers for inflation), you’re looking at a real rate of just 1.2%.

Now just think about everything that you saw in the last 7 years. The volatility. The risk. The turmoil.

Was it worth it? Probably not.

But if we go back further and hold an even longer-term view, the picture must brighten, right?

Let’s go to the peak before that. In early 2000, stocks once again reached what back then was an all-time high.

If you had bought the S&P 500 index back then (which is exactly what I was told at precisely the time that I was told), your annualized rate of return through today would be just 2.17%.

If you adjust that number for taxes and inflation, your real rate of return would be a big fat 0.14%… as in less than 1%. It’s practically ZERO.

Think about what you saw over the last 15 years in the markets—the collapse after 9/11, interest rates cut to zero, interest rates ratchet up again, huge swoons in markets, the credit crunch, Lehman’s collapse, the debt ceiling debacle, etc.

Is all that really worth a return of 0.14% per year? (i.e. 14 cents on every $100 invested)

It makes absolutely zero sense to do this with our money. But that’s what we’re forced into right now with most conventional investments at their all-time highs.

Bottom line—you don’t HAVE to be invested in the market. Sometimes the best investment you make is the investment you don’t make.

The challenge is, of course, that if you’re not invested in the market, your money is just sitting at the bank, earning less than the rate of inflation.

Welcome to the world of mainstream financial options. You’re damned if you do and damned if you don’t.

The conclusion here is very simple. It’s time to move on from the mainstream. There’s too much technology and too many global options now to be lulled into conventional investments that are born to lose.

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See also why Singapore is the best place in the world to store gold.

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December 4, 2014
Santiago, Chile

On May 15, 1855 one of the greatest gold robberies in history occurred.

Three British firms had arranged for some of their gold to be sent from London to Paris by ferry and train. The gold was stored in solidly built boxes secured within iron safes with two locks.

When the boxes were opened in Paris most of the gold was missing, having been replaced by lead shot.

A grand total of 200 pounds of gold were stolen, worth £12,000 or about $3.7 million in today’s money.

In the investigations that followed, police in Britain and France made extensive searches and arrested hundreds of suspects for questioning but ultimately were unable to find any clues to lead them to the perpetrators.

The case was eventually solved a year later when one of the thieves turned in his co-conspirators after an inner dispute.

Arrests were made and in the end police were only able to recover £2,000 of the stolen gold.

The days of armed bandits robbing banks and riding off on horses has long passed but there are still threats to your savings that exist today.

Of course the biggest criminal gang you have to worry about is your own government.

When governments go bankrupt they often look for creative ways to raise revenue, and they’re getting more desperate by the minute.

At the height of the depression in 1933 Franklin Roosevelt banned private ownership of gold, forcing Americans to sell their gold at $20 an ounce and revaluing it at $35 a few weeks later, creating a nice profit for the government.

There’s little stopping the government from performing a similar act, as much of the public considers gold to be an archaic money instrument.

If you want to keep your gold safe it’s worth looking into other jurisdictions where the risk of gold confiscation is much lower.

Hands down the best country in the world to store your gold is Singapore.

Singapore is rapidly becoming THE place to invest and do business in Asia. Everything is just so much easier there. Regulation is minimal, corruption is among the lowest in the world, and the tax structure is very friendly to businesses and investors.

Prices for gold storage are incredibly competitive, and with recent legislation that eliminated import duties and taxes on investment-grade gold, premiums are dropping.

Gold throughout Asia is still highly valued at a cultural level and not seen as some archaic monetary instrument like it is by many in the West.

It’s quite common for people all across the region to store some of their savings in precious metals. Many people from countries like Vietnam, China, India, Malaysia, and Indonesia use storage facilities in Singapore.

Singapore is well connected, with cheap flights to other countries in the region and direct flights to many places in the world.

Singapore is also home to The Safe House (www.thesafehouse.sg), hands down one of the most advanced precious metals storage facilities in the world.

(Note: I am a director of The Safe House’s parent company, though I have no share ownership.)

Getting your gold in and out of the country is easy to do as well. Gold and silver are viewed as commodities by the authorities, which means there are no reporting requirements.

While the idea of storing your gold thousands of miles away may seem strange, all the evidence shows that it’s a bad idea to store gold in your home country.

If your bankrupt Western government slides into insolvency and begins seizing assets or imposing capital controls, you’ll be the smartest guy the room for having physical gold and silver in Singapore.

Yet if nothing happens for now, you won’t be worse off for holding precious metals abroad.

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December 3, 2014
Santiago, Chile

When Francisco Pizarro returned to Spain from the New World in 1528, he told King Charles I of the vast material riches that were found in abundance on Peru’s shores.

He petitioned for permission to conquer the new lands in the name of the crown, and was granted governorship over a vast amount of territory as long as he succeeded in conquering it.

Hungry to get their hands on Incan gold, some 168 Spaniards joined him on the conquest.

In the first battle, the Incans lost 2,000 men while the Spanish lost only 5.

In subsequent battles against the Spaniards, Incan troops were massacred in horrific numbers due in large part to Spain’s technological superiority.

(It also didn’t hurt that the Incan empire was undergoing a civil war at the time.)

The Spaniards would go on to conquer the rest of Incan lands over the next 40 years, which included parts of modern day Argentina, Bolivia, Chile, Colombia, Ecuador and Peru.

And over the next few centuries the Spanish empire would grow to encompass a significant portion of the Americas, some parts of Africa and the East Indies.

Spain was, in fact, the greatest power in Europe during a significant chunk of the renaissance, and she had her overseas dominions to prove it.

How times have changed. Today Spain is in financial straits, and most of her former colonies are in far better economic shape.

And as the gloomy economic landscape in Europe has dried up opportunities for young Spaniards, many have started to look to South America to start new careers.

Between 2008 and 2012 an estimated 700,000 Spaniards have left home in search of greener pastures, choosing to go to places like Colombia, Peru, and Chile.

Unencumbered by a language barrier and without much culture shock, they’re finding that they’re able to rise up the career ladder much more quickly than they could back home.

The shortage of skilled labor and advanced training in these countries means that foreigners are able to obtain higher paying jobs than they could back home.

Some recent college grads find themselves occupying senior level positions after just a few years because there is no one else around qualified for the job.

Even folks who are not with a large corporation or hold an advanced technical degree still have valuable skills.

Just by virtue of being a consumer in the West, for example, you know much more about proper customer service than people in countries that aren’t constantly exposed to such high standards.

I see the same situation in dozens of countries all over the world as I travel. There are many places where local talent and skills simply aren’t catching up fast enough with economic growth.

They are hungry for skilled labor and the entrepreneurially-minded.

This bespeaks a greater trend of our times: some of the best opportunities are abroad. And in uncertain times, you have to carve an independent path to achieve success.

I was always told growing up that if I studied hard and worked my way up the corporate food chain that I’d become successful. Did they tell you that lie too?

That entire premise is fundamentally broken.

But the good news is that it’s never been easier to venture abroad in search of some of the most enticing opportunities out there.

And the transition is not nearly as treacherous as it might seem.

Our ancestors spent months on a boat with a good chance of never coming back. Today we can hop on an airplane and wake up on the other side of the planet.

We can communicate with friends and family with a mouse click. And we can even meet people and conduct research before we arrive.

All the tools and technology exist to make the transition abroad extremely smooth.

It just takes independence of mind to break out of the current mold and embrace the tremendous opportunity you can find overseas.

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December 2, 2014
Santiago, Chile

On October 22, 1981, the government of the United States of America accumulated an astounding $1 TRILLION in debt.

At that point, it had taken the country 74,984 days (more than 205 years) to accumulate its first trillion in debt.

It would take less than five years to accumulate its second trillion.

And as the US government just hit $18 trillion in debt on Friday afternoon, it has taken a measly 403 days to accumulate its most recent trillion.

There’s so much misinformation and propaganda about this; let’s examine some of the biggest lies out there about the US debt:

1) “They can get it under control.”

What a massive lie. Politicians have been saying for decades that they’re going to cut spending and get the debt under control.

FACT: The last time the US debt actually decreased from one fiscal year to the next was back in 1957 during the EISENHOWER administration.

FACT: For the last several years, the US government has been spending roughly 90% of its ENTIRE tax revenue just to pay for mandatory entitlement programs and interest on the debt.

This leaves almost nothing for practically everything else we think of as government.

2) “The debt doesn’t matter because we owe it to ourselves.”

This is probably the biggest lie of all. Two of the Social Security trust funds alone (OASI and DI) own $2.72 trillion of US debt.

The federal government owes this money to current and future beneficiaries of those trust funds, i.e. EVERY SINGLE US CITIZEN ALIVE.

I fail to see the silver lining here. How is it somehow ‘better’ if the government defaults on its citizens as opposed to, say, banks?

3) “They can always ‘selectively default’ on the debt”

Another lie. People think that the US government can pick and choose who it pays.

They could make a bing stink about China, for example, and then choose to default on the $2 trillion in debt that’s owed to the Chinese.

Nice try. But this would rock global financial markets and destroy whatever tiny shred of credibility the US still has.

Others have suggested that the government could selectively default on the Federal Reserve (which owns $2.46 trillion of US debt).

Again, possible. But given that the Fed (the issuer of the US dollar) would become immediately insolvent, the resulting currency crisis would be completely disastrous.

4) “It’s the NET debt that’s important”

Analysts often pay attention to a country’s “net debt” instead of its gross debt. If you have a million bucks in debt, and a million bucks in cash, then your ‘net debt’ is zero. It washes out.

Problem is, the US government doesn’t have any cash. The Treasury Department opened its business day on Friday morning with just $71.9 billion in cash, or just 0.39% of its total debt level.

Apple has more money than that.

5) “They can fix it by raising taxes”

No they can’t. Just look at the numbers. Since the end of World War II, US government tax revenue has consistently been roughly 17% of GDP.

They can raise tax rates, but it doesn’t move the needle in terms of revenue as a percentage of GDP.

In other words, the government’s ‘slice of the pie’ is pretty consistent.

You’d think with this obvious data that, rather than try to increase tax rates (ineffective), they’d do everything they can to help make a bigger pie.

Or better yet, just leave everyone the hell alone so we’re free to bake as much as we can.

But no. They have to regulate every aspect of people’s existence: How you are allowed to educate your children. What you can/cannot put in your body. How much interest you are entitled to receive on your savings.

All of this costs time, money, and efficiency. So do never-ending wars. The bombs. The drones. The airstrikes.

This isn’t about any single person or President. The problem is with the system itself.

History shows that every leading superpower from the past almost invariably fell to the same fate.

Great powers often feel that their wealth and success entitles them to spend recklessly and wage endless, arrogant wars. The Romans. The Ottoman Empire. The British.

History may not repeat but it certainly rhymes. And the lesson here is very clear: debt weakens a nation. It weakens a society.

Generations that will not even be born for decades will inherit these debts by complete accident of birth.

And the people in charge of the system have backed themselves into a corner where there is no way out other than to default– either on their creditors (creating a global financial crisis), the central bank (creating a currency crisis), or on the citizens themselves (creating an epic social crisis).

Bottom line: this is not a consequence-free environment. And while you can’t fix the debt problem, you can certainly reduce your own exposure to what happens next.

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