What you can learn from the founders of Hong Kong

Hong Kong 150x150 What you can learn from the founders of Hong Kong

February 5, 2014
Panguipulli, Chile

As you may know, I’m an avid reader. I devour especially historical accounts of any kind, because I consider lessons of history to be invaluable. As the Latin proverb says: Historia magistra vitae est—history is life’s teacher.

One of my all-time favorite books is a novel by James Clavell, Tai-pan. It’s the second book in his series of six novels known as The Asian Saga—a fictional account of historical facts.

Tai-Pan tells the story of Western, and especially British, traders at the time of the Opium Wars with China. The story starts right after the British have defeated the Chinese Empire in the First Opium War and claimed a barren island in the Pearl River delta as a British possession—Hong Kong.

Tai-Pan is actually a Cantonese term that literally means “big shot”, and was reserved strictly for top foreign businessmen and traders operating in the Chinese realm.

In the story, right after the ceremonial claim of Hong Kong, the eponymous Tai-Pan, a Scottish merchant Dirk Struan, who dominates the trade in tea, silk, and opium, receives letters and dispatches from his son Culum who has just arrived to the Orient from Scotland:

“Finally he broke the seal on his banker’s letter. He read it and exploded with rage.

“What is it?” Culum asked, frightened.

“Just an old pain. Nothing. It’s nothing.” Struan pretended to read the next dispatch while raging inwardly over the contents of the letter. Good sweet Christ!

“We regret to inform you that, inadvertently and momentarily, credit was overextended and there was a run on the bank, started by malicious rivals. Therefore we can no longer keep our doors open. The board of directors has advised we can pay sixpence on the pound. I have the honor to be, sir, your most obedient servant…”

And we hold close to a million sterling of their paper. Twenty-five thousand sterling for a million, and our debts close to a million pounds. We’re bankrupt.

Great God, I warned Robb not to put all the money in one bank. Na with all the speculating that was going on in England, na when a bank could issue paper in any amount that it liked.”

Chillingly familiar, right?

A million pounds was an ENORMOUS amount of money in the 1840s. And here the biggest merchant in the Orient fell into the same trap as many people do today. He failed to recognize the risks and diversify accordingly.

He was obviously aware of the threats, but didn’t act when he had the time and opportunity to do so.

The world is not that different today.

Just last week we talked about how HSBC in the UK is restricting its customers’ access to their own money. As revolting as it seems, this is what banks with capital shortfalls and liquidity crunches do.

Another thing from Europe which has gone completely unnoticed was a hearing in the European Parliament on banking, during which the new German board member of the European Central Bank, Sabine Lautenschlaeger said that it should be possible to wind down failing eurozone banks over a weekend “before markets open in Japan on Monday.”

The threats and warning signs are there for everyone to see even today.

The question is, will you have the foresight to act and mitigate your risks beforehand, or will you end up regretting your inaction, just like the Tai-Pan?

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This place is a Europe lover’s paradise in the middle of South America

zell am see main 1 copy1 150x150 This place is a Europe lovers paradise in the middle of South America

February 4, 2014
Pucon, Chile

In my travels to 100+ countries over the years, I’ve discovered that there is an indubitable abundance of great places to be.

There are rapidly developing countries in Asia right now on the cusp of massive social and economic transformations, replete with huge opportunities for investors and entrepreneurs.

Many of Europe’s most splendid destinations are on sale. They’re practically giving away property in Greece, Italy, and the Iberian Peninsula these days.

Over the last few years we’ve covered some amazing, far flung locales across the corners of the world– from San Marino and Andorra to Norfolk Island and Labuan to the amazing Galapagos.

But in my view, Chile still stands out above all the rest as having the BEST mix of business, investment, and lifestyle opportunities. And all in a place that is easily THE most advanced, civilized country on the continent.

One of Chile’s best traits is its geographic diversity. It’s astounding that a country this size spans more climate and geographic zones than Europe or the United States.

In the central part of Chile near Santiago, it’s -very- Mediterranean. Dry, temperate climate. LOTS of sunshine. Beautiful vistas of rolling hills, cultivated with vineyards, olive groves, and fruit trees.

In fact, I just had guests from Italy visiting a few weeks ago who remarked how much it reminded them of home… except for the lightly snow-capped Andean peaks off in the distance.

Today, after a scenic road trip, I’m back down here in the south of Chile once again. And compared to the central area, it feels like it’s practically a world away.

The weather and landscape feel much more like the western Alps in Europe.

Even the culture here is very European. This area was settled by German colonists in the late 1800s, and to this day, the German influence has had a profound impact on the region and raised the bar on quality.

The construction is better. The roads are better. Just about everything is maintained to a higher standard than the rest of Chile.

The German influence is also obvious in architecture, cuisine, and even language. I have several local colleagues, for example, who grew up speaking German at home and learned Spanish as a second language.

You see German signs. German restaurants. Driving down the Interlake Highway flanked by the Andes, it’s easy to get confused and think that you’re in the Austrian Alps. It reminds me of Zell-am-See, the famous lakeside Austrian ski town near Salzburg.

Even many of the people here are fair-skinned and light-eyed with surnames like Pfeil and Weiss.

No doubt, when the first group of intrepid European colonists put down roots here in the 19th century, they were taking a big risk.

But that colony of expats grew rapidly as more and more people moved away from their homeland over the last 100+ years seeking a better, richer, fuller life abroad.

Many were escaping the obvious destruction that was unfolding back home.

Down here, they dodged world wars and mass genocide. And they found kinship, camaraderie, and new opportunities, all the while maintaining their traditions and cultural identity.

This region shows that “home” does not necessarily have to be the place where you grew up, or where the government issued your passport.

If the conditions warrant, and “home” is going down the tubes, all the essential elements– language, people, traditions, etc. can be transplanted elsewhere and live on, thriving, for generations to come.

It’s an important example that certainly bears highlighting today.

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Summing up Ben Bernanke’s reign in four numbers

dishonest ben 150x150 Summing up Ben Bernankes reign in four numbers

January 31, 2014
Sovereign Valley Farm, Chile

First of all, a very Happy New Year to our many Chinese readers.

According to the ancient Zodiac, today we are shedding the coils of the year of the Snake in favor of the Horse.

Given this symbology, it is perhaps a very small irony that today is also the final day in office for Ben Bernanke, chairman of the US Federal Reserve. Let’s review the statistics:

1) When Mr. Bernanke took office in 2006, the Fed had $834.6 billion in assets, the vast majority of which were US Treasuries.

As of Wednesday, Mr. Bernanke’s Fed now counts $4.1 trillion in assets. And the balance sheet is stuffed full of mortgage debt ‘guaranteed’ by insolvent government agencies.

2) When Mr. Bernanke took office, the Fed’s capital ratio (net equity divided by total assets) was 3.22%.

This capital ratio is a hugely important number in banking that represents a sort of ‘margin of safety’. In a severe crisis situation, banks with a higher capital ratio are able to withstand major financial shocks.

Candidly, 3.22% is not high; this means that the Fed would effectively be rendered insolvent if its assets lost more than 3.22% of their value. So the Fed that Mr. Bernanke inherited was not exceptionally healthy.

But today, Mr. Bernanke leaves office with the balance sheet in far worse condition. The Fed’s capital ratio is just 1.34%. And it’s deteriorating rapidly.

Three years ago, the Fed’s capital ratio was 2.17%. A year ago it was 1.82%. Six months ago it was 1.54%. And now today just 1.34%. It doesn’t take a rocket scientist (or a PhD in economics) to see how quickly this is unraveling.

The Fed now has a razor thin margin of safety to guarantee a bloated balance sheet crammed full of questionable assets. This is not exactly the height of responsible stewardship.

Has it helped? I suppose that depends on whom you ask.

3) When Mr. Bernanke took office, the Dow Jones Industrial Average stood at 10,954, and the US government could borrow money for ten years at 4.57%.

Today the Dow is at 15,569, and the 10-year note is 2.65%.

So this has been a pretty good run for folks who have thrown money in the stock market or have heavily indebted themselves.

Yet over 50% of Americans don’t own a single share of stocks. And as of 2010, 10% of Americans own 81% of all stocks.

Then there’s the Federal government, which has been able to pass off trillions of dollars of debt to a willing central banker, as well as generate tax revenue from all the stock investors’ capital gains.

4) Most folks, however, have seen a different side of the Fed’s expansion. The FAO food price index, for example, has increased from 122 to 207, and the labor force participation rate declined to its lowest level in decades under Mr. Bernake’s tenure.

It’s fairly clear if you look at the data objectively that Mr. Bernanke’s policies have left the Fed (and consequently the global financial system) in far more precarious condition than when he started, yet disproportionately benefited the US government and small percentage of society at the expense of everyone else.

This is not to say that Mr. Bernanke is some evil mastermind bent on nefarious ends.

When I listened to him explain his decision-making process at a dinner in Washington a few months ago, it became clear that he is very well intentioned and honestly believes that his policies help.

Unfortunately the road to ruin is almost always paved with good intentions.

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Presenting the latest country to lose confidence in the dollar….

zimdollars 150x150 Presenting the latest country to lose confidence in the dollar....

January 30, 2014
Sovereign Valley Farm, Chile

Zimbabwe. You remember those guys, right?

The country’s plight with its currency became world famous, the butt of untold jokes in economic circles. At its height, hyperinflation in Zimbabwe reached nearly 90 sextillion in 2008.

That’s a 9 with 22 zeros.

To put it in context, if you had 90 sextillion grains of sand, you could cover the entire surface of the earth all the way to the outmost layers of the atmosphere.

Then, in April 2009, the government effectively abandoned the Zimbabwe dollar. The US dollar became the official currency for all government transactions, and US dollars, British pounds sterling, euros, and South African rand became the most widely used tender in circulation.

I’ve traveled to Zimbabwe frequently; they have some of the best stories you could ever hear about standing in line at the banks with wheelbarrows, and using stacks of paper currency at home for toilet paper or furniture.

Given that Zimbabwe is literally THE poster child for hyperinflation over the last half-century, one cannot understate the irony of their latest announcement.

Just yesterday, the government there announced that the Chinese renminbi (among other currencies) will become legal tender in Zimbabwe.

This is big news. As we have discussed so many times in the past, the current fiscal and monetary antics in the United States are absolutely no different than what Zimbabwe employed several years ago.

Zimbabwe printed its currency in nearly infinite quantities. So has the United States. The only difference is that the US dollar is readily accepted around the world thanks to good ole’ American credibility that was built by previous generations.

But that credibility is rapidly deteriorating. And everywhere you look, there are obvious signs that the rest of the world is quickly moving on from the dollar.

Central banks around the world are stocking up on gold. Major powers like China and Russia are calling for a new reserve currency. And a number of nations (Zimbabwe is the latest) have already begun to use other currencies like the renminbi for international trade and central bank reserves.

It’s happening. And it’s one of those things that will play out like what Hemingway wrote about going bankrupt: gradually, then suddenly.

The dollar’s share of global reserves has slowly fallen from roughly 75% in 2001, to just over 60% today.

But the world will eventually reach a bifurcation point where investors, foreign governments, central banks, etc. panic and start rushing for the exits.

It’s something that could happen tomorrow. Or five years from now. No one knows. But rational, intelligent people shouldn’t be waiting around for it to happen.

I very strongly recommend that you take a portion of your savings and move them into real assets– precious metals and productive land are the most obvious. But even things like collectibles or nonperishable goods (like ammunition) would be preferable to US dollars.

Then there’s other currencies that you can hold. Right now, the Norwegian krone has the strongest fundamentals in the world as it is backed by the most solvent central bank on the planet.

The Hong Kong dollar is also an interesting option because it minimizes your downside currency risk while providing protection against the US dollar’s deterioration.

(Premium members: please refer to your SMC welcome guide for actionable information about holding Hong Kong dollars and Norwegian krone.)

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IRA confiscation: it’s happening

January 29, 2014
Santiago, Chile

I have an old acquaintance named Sam who has a hell of a deal for you.

Sam is actually a pretty famous guy with a big reputation. Unfortunately he has been a bit down and out on his luck lately… but he’s trying to make a comeback. And Sam is prepared to float you a really great investment opportunity.

Here’s the deal he’s offering: you give Sam your hard-earned retirement savings. Sam will invest your funds, and pay you a rate of return.

Granted, the rate of return he’s promising doesn’t quite keep up with inflation. So you will be losing some money. But don’t dwell on that too much.

And, rather than invest your funds in productive assets, Sam is going to blow it all on new cars and flat screen TVs. So when it comes time to make interest payments, Sam won’t have any money left.

But don’t worry, he still has that good ole’ credibility. So even though his financial situation gets worse by the year, Sam will just go back out there and borrow more money from other people to pay you back.

Of course, he will be able to keep doing this forever without any consequences whatsoever.

I know what you’re thinking– “where do I sign??” I know, right? It’s the deal of the lifetime.

This is basically the offer that the President of the United States floated last night.

And like an unctuously overgeled used car salesman, he actually pitched Americans on loaning their retirement savings to the US government with a straight face, guaranteeing “a decent return with no risk of losing what you put in. . .”

This is his new “MyRA” program. And the aim is simple– dupe unwitting Americans to plow their retirement savings into the US government’s shrinking coffers.

We’ve been talking about this for years. I have personally written since 2009 that the US government would one day push US citizens into the ‘safety and security’ of US Treasuries.

Back in 2009, almost everyone else thought I was nuts for even suggesting something so sacrilegious about the US government and financial system.

But the day has arrived. And POTUS stated almost VERBATIM what I have been writing for years.

The government is flat broke. Even by their own assessment, the US government’s “net worth” is NEGATIVE 16 trillion. That’s as of the end of 2012 (the 2013 numbers aren’t out yet). But the trend is actually worsening.

In 2009, the government’s net worth was negative $11.45 trillion. By 2010, it had dropped to minus $13.47 trillion. By 2011, minus $14.78 trillion. And by 2012, minus $16.1 trillion.

Here’s the thing: according to the IRS, there is well over $5 trillion in US individual retirement accounts. For a government as bankrupt as Uncle Sam is, $5 trillion is irresistible.

They need that money. They need YOUR money. And this MyRA program is the critical first step to corralling your hard earned retirement funds.

At our event here in Chile last year, Jim Rogers nailed this right on the head when he and Ron Paul told our audience that the government would try to take your retirement funds:

I don’t know how much more clear I can be: this is happening. This is exactly what bankrupt governments do. And it’s time to give serious, serious consideration to shipping your retirement funds overseas before they take yours.

(Note to members of our PREMIUM service: look for an upcoming actionable alert on this topic).

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The REAL State of the Union in just 889 words…

shutterstock 146004131 150x150 The REAL State of the Union in just 889 words...

Mr. Speaker, Mr. Vice President, members of Congress, fellow citizens:

This summer we will commemorate the 100th anniversary of the start of World War I.

This senseless, destructive war was started and championed by politicians who cared nothing for the 9 million people who lost their lives.

And in doing so, they began a century of warfare which continues to this day.

Our military industrial complex is larger than ever. We have nearly 2 million troops and national guardsmen, plus 3.5 million civilians employed in the defense sector.

With such awesome capabilities, we continue to resort to violence and death to exact political goals which benefit a tiny elite.

All of this has created a police state in the Land of the Free that is a far cry from the country we all grew up in.

Your government has spawned a culture of fear and intimidation. Nearly every federal agency, including the Fish and Wildlife Service, has its own gun-toting police force to pistol-whip citizens into submission.

And we’re stocking up. Your government has recently procured 1.6 BILLION rounds of hollow-point ammunition to supplement our existing supplies.

But frankly, we don’t need guns to harass citizens.

Our tax authorities have become more threatening than mafia warlords. The plunder is so severe that record numbers of Americans are renouncing their citizenship and leaving the country.

There are now dozens of federal, state, and local agencies and courts which have the power to confiscate your assets without any due process.

In addition to your house, your business, and your savings, we also have the authority to take your children away from you as if they are property of the state.

We are here to tell you what you can and cannot put in your own body, or whether you can collect rainwater that falls on own property.

In fact, on any given business day, the federal government issues hundreds of pages of new ‘rules’, proposed regulations, draft bills, executive orders, and/or regulatory notices.

And if you are not compliant with these rules, you may be committing a crime. Whether you know it or not.

When this nation was founded, there were four federal crimes on the books. Today there are THOUSANDS. Plus we have millions of government employees at all levels to enforce the penalties.

All of this, of course, is financed by you the tax slave.

You (plus unborn generations) are the poor suckers charged with paying off the national debt we politicians have created.

Officially the debt is just north of $17 trillion. But if you include Social Security and pension shortfalls, the figure is several times higher.

You’ll never know for sure because we have become masters of deceit regarding official statistics, whether inflation, unemployment, or our liabilities.

But the situation is so dire that the Congressional Budget Office projects the Social Security Administration’s disability insurance trust fund to RUN OUT by 2017.

We get by year after year by increasing the debt. And at well over 100% of GDP, we have truly reached the point of no return.

We are now in a position where we must default. Either we must default on our national debt, or we must default on our obligations to you the citizens.

We may end up stealing your savings. Robbing your Social Security. Taxing you to death. Or simply inflating away the value of our debt.

Naturally, we’re going to screw you in the process somehow… so be prepared for that. Especially the inflationary tidal wave that’s coming.

Our central bank has expanded its balance sheet at an unprecedented pace, creating massive asset bubbles in its wake. These asset bubbles have disproportionately benefited the ultra-wealthy at the expense of everyone else.

Such wanton money printing has also been tremendously destructive to our credibility. Other nations worry about our reckless irresponsibility. That’s why we keep spying on them.

Make no mistake: the consequences of our actions are here. And the days of the United States as the world’s dominant superpower are finished.

As the decline hastens, we will struggle to sell our debt to the world and to ship our dollars abroad. Fewer nations will be interested in our empty promises.

And without the generosity of other nations loaning us money at record low interest rates that fail to keep pace with inflation, you will really be screwed.

When this happens, you can absolutely count on us to clamp down even harder on the economy and control even more of your lives. For your own good, of course.

No, this may not be the country that you all grew up in. But it is the state of our union… whatever remains of it.

And so my fellow Americans, I urge you to grab your ankles and get ready for a little ‘shared sacrifice’.

But don’t worry about me, or my senior staff. We will leave government with cushy pensions, $750,000 speaking fees, board seats on public companies, and top positions in the industries that we have accommodated at your expense.

And of course I will be paid handsomely for the arrogant memoirs I will write in which I deny any responsibility for the shit I’ve gotten you all into.

So when I say “shared sacrifice”, I really mean “your sacrifice”.

Thank you. God bless you, and God bless these United States of America.

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This is what banks do when they go broke

novault 150x150 This is what banks do when they go broke

January 27, 2014
Santiago, Chile

It’s happening again. This time HSBC branches in the UK are putting limits on customer withdrawals.

Bank employees there have been telling customers that they first must demonstrate to the bank’s satisfaction WHY they want to withdraw their own money. The bank has simply decided in its sole discretion that it won’t give people their own money back.

This is positively revolting– a breach of a most sacred form of trust between a bank and its customers. It would have been unthinkable just 10-years ago. But today it’s par for the course.

Banks across most of the ‘developed’ world have razor thin liquidity and capitalization ratios—meaning that their margins of safety are extremely low.

If just a small percentage of their assets lose value, they’ll go under. Or, if just a small percentage of their customers want their deposits back, they won’t be able to pay up.

This is ultimately what’s happening to HSBC. It turns out their UK operations are in severe financial trouble, posting a major capital shortfall of over $100 billion.

This should come as no surprise. Less than a year ago, in response to how poorly capitalized British banks were, the banking regulators announced that it would allow banks to use creative accounting to boost their numbers.

In one method that was explicitly condoned by regulators, banks were authorized to count FUTURE earnings (i.e. profit that they may or may not earn in years to come) towards their capital TODAY.

It’s like calculating your net worth based on how much you -think- you might be earning 20-years from now.

This is fraud, plain and simple. And I wrote about this numerous times last year.

Of course HSBC is not alone. With few exceptions, most banks across Europe are in a similarly precarious position– highly illiquid and thinly capitalized.

This isn’t rocket science– it’s what broke banks do. We saw what happened in Cyprus last year when banks got “bailed-in” by their customers.

We’re seeing similar restrictions on cash withdrawals in Italy where the amounts are even much lower. Banks in the US have recently started imposing restrictions on international wire transfers as well.

To anyone paying attention, the warning signs are all flashing red.

The days when you could simply assume that your bank is healthy, and a safe custodian of your money, are long gone… and people need to be aware of this.

There are consequences to keeping funds in overstretched and starved-out banking systems. When push comes to shove, those banks will either go under and take your deposits with them (Cyprus), or they’ll make it incredibly difficult for you to access your own money. This is what HSBC is doing in the UK.

Fortunately, not every jurisdiction is the same.

I’ve written, for example, about the strong liquidity and solvency of the banking system in Norway numerous times, where there is enough cash in the banking system to back up 25.5% of customer deposits as of Q3/2013. In Singapore, it’s 24.7%.

Even HSBC as a global bank isn’t the same everywhere. Its UK division might not be worth much, but its Hong Kong operation enjoys a solid 25.9% liquidity ratio. This is nearly an order of magnitude higher than its peers in the West.

There are a lot of options out there. And it’s definitely time to start thinking (and moving your money) in this direction. Otherwise it could be you who wakes up tomorrow to find out that your bank is holding your money hostage.

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No inflation Friday: the dollar has lost 97% of its value against stamps

shutterstock 29884336 150x150 No inflation Friday: the dollar has lost 97% of its value against stamps

January 24, 2014
Sovereign Valley Farm, Chile

One of the greatest lies of the modern financial system (and that’s really saying something) is about inflation.

The puppet masters who control the system have managed to convince people that deflation = bad, and inflation = necessary evil.

Perhaps the even bigger lie is that of the actual inflation statistics. They tell us that there’s no inflation… or minimal inflation.

And they tell us that the ‘target’ rate is 2%. Bear in mind that 2% annual inflation means your currency will lose over 75% of its value during the course of your lifetime.

But these figures are massively understated. And you don’t have to look hard for proof.

US postage stamp rates, for example, are set to increase this weekend. They’ve been going up almost every year since 2006.

This weekend, the rate for a one-ounce first class letter will rise to 49c from 46c, a 6.5% increase. And the price to send a postcard will rise from 33c to 34c, a 3.0% increase.

If you take a longer-term view, the price of a postcard back in 1951 was just one cent. This means that the dollar has lost over 97% of its value against postcard shipping rates in the last six decades.

Let’s look at this another way.

According to the US Department of Labor, the average household income in 1950 was $4,237. This means that the average US household could afford to send 423,700 postcards back then.

Today’s median household income is $51,017 (and that’s from a majority of dual-income households). This means the average family in the Land of the Free can now afford to send about 150,050 postcards.

It’s a huge difference. The standard of living denominated in postcards has declined by nearly two-thirds since the 1950s.

Short-term, long-term, the conclusion is the same: Inflation exists.

And any suggestion to the contrary that inflation is ‘good’ or at least a ‘necessary evil’ is simply a lie. It destroys both purchasing power and standard of living.

Rational, thinking people need to be aware of this. If you hold a lot of your savings in a bank denominated in paper currencies like the dollar or euro, you will lose.

And I’d strongly urge you to consider holding at least a portion of your savings in stronger, more stable currencies, or better yet, alternative asset classes that cannot be inflated away by central bankers.

This includes productive real estate, precious metals, or even collectibles.

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Here it comes– more leading economists call for capital controls

shutterstock 88014667 1 150x150 Here it comes   more leading economists call for capital controls

January 23, 2014
Sovereign Valley Farm, Chile

As the saying goes, ‘desperate times call for desperate measures.’

The phrase is bandied about so frequently, it’s generally accepted truth. But I have to tell you that I fundamentally disagree with the premise.

Desperate times, in fact, call for a complete reset in the way people think. Desperate times call for the most intelligent, effective, least destructive measures. But these sayings aren’t as catchy.

This old adage has become a crutch– a way for policymakers to rationalize the idiotic measures they’ve put in place:

  • Inflation-adjusted interest rates that are… negative.
  • Trillion dollar deficits.
  • Endless wars and saber-rattling
  • Unprecedented expansion of central bank balance sheets.
  • DIRECT CONFISCATION of people’s bank accounts.

But hey… desperate times call for desperate measures. I guess we’re all just supposed to be OK with that.

One of those desperate measures that’s been coming up a lot lately is the re-re-re-introduction of capital controls.

It started in late 2012, when both the European Central Bank and the International Monetary Fund seperately endorsed the use of capital controls.

For the IMF, it was a staunch reversal of its previous position, and Paul Krugman lauded the agency’s “surprising intellectual flexibility” a few days later.

The IMF then followed up in 2013 with another little ditty proposing a global wealth tax. The good idea factory is clearly working ’round the clock over there.

Lately, two more leading economists– Harvard professors Carmen Reinhart and Ken Rogoff– have joined the debate.

In a speech to the American Economic Association earlier this month, the pair suggested that rich economies may need to resort to the tactics generally reserved for emerging markets.

This is code for financial repression and capital controls.

The idea behind capital controls is simple: create barriers to restrict the free flow of capital. And if you’re on the receiving end, capital controls can be enormously destructive.

But for politicians, capital controls are hugely beneficial; once they trap funds within their borders, the money can be easily taxed, confiscated, or inflated.

Historically, capital controls have been used in ‘desperate times’. Too much debt. Too much deficit spending. Wars. Huge trade deficit. Intentional currency devaluation. Etc.

Does any of this sound familiar? It’s no surprise that policymakers have once again turned to this ‘desperate measure’. They’re already here.

Iceland has capital controls, over five years after its spectacular meltdown. We can also see capital controls in Cyprus, India, Argentina, etc.

I’ve been writing for years that capital controls are a foregone conclusion. This is no longer theory or conjecture. It’s happening. And every bit of objective evidence suggests that the march towards capital controls will quicken.

This is a HUGE reason to consider holding a portion of your savings overseas in a strong, stable foreign bank where your home government won’t as easily be able to trap your savings.

Other options including storing physical gold (even anonymously) at an overseas depository. Or if you’re inclined and tech savvy, you can also own digital currency.

But perhaps the best way to move some capital abroad is to own foreign real estate, especially productive land.

Foreign real estate is not reportable. It’s a great store of value. It generates both financial profits and personal resilience. It’s a LOT harder to forcibly repatriate. And it ensures that you always have a place to go in case you need to get out of Dodge.

Even if nothing ‘bad’ ever happens, you won’t be worse off for owning productive land in a thriving economy.

Like I said– desperate times don’t call for desperate measures. More than ever, it’s time for a complete reset in the way we look at the most effective solutions. These options are certainly among them.

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He aquí: ¡Una grandiosa forma de perder mucho dinero!

shutterstock 93925792 150x150 He aquí: ¡Una grandiosa forma de perder mucho dinero!

16 de Enero del 2014, Santiago de Chile

Hay un minúsculo parasito que existe en la naturaleza conocido como: Spinochordodes tellinii el cual infecta grillos y saltamontes.

Una vez que ha alcanzado la madures este gusano es capaz de afectar profundamente el comportamiento de su anfitrión; entre lo más destacado, este gusano puede hacer al saltamontes lanzarse al agua sin su consentimiento.

Esto es perfecto para el gusano ya que necesita humedad para reproducirse. Pero para el saltamontes eso significa la muerte.

Otro vil espécimen conocido como Toxoplasma gondii, que de acuerdo a estudios, al infectar a ratones y ratas estas han demostrado una reducción de sus defensas, haciéndolas más vulnerables a ser alimento para gatos.

La naturaleza está llena de esos indeseables parásitos que manipulan a sus anfitriones, causando comportamientos irracionales, destructivos, y suicidas.

Por supuesto también existen estos entre los seres humanos… Especialmente para inversionistas. La verdad la mayoría de las veces el paracito más peligros y que afecta a la mayor cantidad de inversionistas es una emoción peculiar, llamada: Temor.

Específicamente, el temor a perder una oportunidad dorada. Esto se puede convertir en una pesadilla peor que el mismo temor a perderlo todo.

Ahora si todo el mundo está tirando su dinero por el mismo agujero, se vuelve más fácil olvidar el riesgo de perder nuestros ahorros de toda la vida, invirtiéndolas en ridículas acciones sobrevaluadas.

La mejor manera de perder mucho dinero es seguir a las masas.

Muchos de aquellos grandes y exitosos inversores de la historia fueron esos que tuvieron el coraje de ir en contra de la corriente y del pensamiento inversionista común. Conquistaron el miedo de perder su oportunidad dorada, y fueron y compraron aquello que nadie quería, lo odiado… o más aun, pusieron la vista donde nadie se arriesgaría a ponerla.

Hoy en día con el clima en la bolsa donde está, donde los Bancos Centrales están imprimiendo trillones de dólares por año y empujando por todos lados los precios de los bienes activos, es a veces difícil encontrar demasiados de esas playas vírgenes, o “acciones odiadas” Pero aún existen algunas:

1. Metales Preciosos

El mercado de hoy en día ha socavado y menos preciado el oro. ¡Está acabado! o eso es lo que la sabiduría convencional diría. Especulaciones y sentimentalismos hacia un crecimiento de la economía, han llevado inversores a abandonar el oro, la plata, el platino, etc.

2. Compañías Mineras

Con la rápida caída del mercado de los metales y los márgenes en minería declinando, los precios de las acciones en compañías mineras han pasado de feas a terribles… y muchos inversores a largo plazo están literalmente yéndose a la quiebra.

3. Monedas de mercados emergentes

La moneda en el mundo emergente- Turquía, India, Indonesia, Uruguay, etc. Han sido maltratadas y subestimadas en los últimos meses por el temor de una crisis mundial, a pesar de esto, estas naciones demográficamente cuentan con un cimiento económico fuerte.

Ahora, hablamos de dónde va la masa, es fácil.

Las acciones en EE.UU y Europa Occidental están cada vez más altas.

El renminbi Chino está en un alza de varios años. Y inexplicablemente su mercado está mostrando mucha confianza en ambos el dólar y el euro en este momento.

Los Bonos de gobiernos de los gobiernos occidentales, los cuales están muy endeudados, aun son vistos con obviedad refugios seguros.

Los gobiernos de España e Italia, de hecho, solo emitieron recién nuevos bonos en un nivel record en bajo rendimiento… Obviando por supuesto la juventud desempleada que alcanza el 57.7% y ni hablar de la gigantesca deuda o el déficit en gastos.

A pesar del incremento gradual de los interés que adversariamente impactan los precios y el bolsillo de la gente. Los bienes raíces en EE.UU son una vez más aclamada por los medios como una inversión segura.

Por ultimo-¿Que podría no estar en el radar del rebaño de inversionistas colectivo?

De mi punto de vista, muy pocos inversionistas convencionales están siquiera pensando sobre tierras para agricultura fuera de los EE.UU o en capital privado en mercados en desarrollo.

Pronto, mas sobre este tema.

from SOVErEIGN MAN http://ift.tt/KFZS5j