Category: simonblack

September 26, 2014
Sovereign Valley Farm, Chile

We like to think of the solutions we provide here at Sovereign Man as seatbelts—common sense tools you might never need it, but could save your life in a real emergency.

If you live, work, bank, own property, invest, structure a business, store gold, etc. all in the same country of your citizenship, you’re at mercy of the political climate of one single jurisdiction.

This is a lot of faith to place in one country… especially if that country is on a downward slide of debt, money printing, and erosion of freedom.

The idea of international diversification is to spread different aspects of your life across different jurisdictions so that no single country has total control over you.

Only then can you be truly free and independent.

One key node in any international diversification strategy is having multiple citizenships and passports.

Having another passport means having more options. It means you can travel. It means you can live in other countries. You can do business in other countries. You have greater ease in opening investment and financial accounts.

It also means that, in a worst-case scenario occurred and you had to get out of Dodge, you’ll always have a way out… and a place to go.

If you’re lucky enough to have ancestors from places like Poland, Italy or Ireland, then obtaining a second passport is very straightforward.

But for most people who aren’t part of the lucky bloodline club, obtaining a second citizenship and passport requires one of three things:

• Money
• Time
• Flexibility

You can obtain citizenship through investment or “donation” in places like St. Kitts, Dominica, Antigua, or Malta.

These options are expensive, though. The cheapest citizenship-by-investment programs run well into six figures, hardly a trivial sum for most.

But if you’re flexible with your time and lifestyle, you can obtain citizenship in one of these places at relatively little cost:

Brazil

If you’re flexible and willing to go the unorthodox way, you can obtain citizenship in Brazil after as little as a year of living there by having a Brazilian child. It works, I know several folks who have done this or are in progress.

Another route to citizenship is by marrying a Brazilian. In fact, the marriage route just got easier. [Note to Premium Members: I’ll tell you more about this soon.]

Panama

Panama is the easiest place in the world to establish residency under the so-called “Friendly Nations Visa”.

It’s a straightforward process that involves setting up a local company and opening a bank account with a fairly small sum. You don’t even have to spend time in the country. And after five years, you’re eligible to apply for naturalization.

Israel

Are you Jewish? Do you want to be? Any Jew can qualify for Israeli citizenship under the Law of Return. The added benefit is that, just like Brazil, Israel doesn’t extradite its citizens, which is a good option to have if you ever find yourself in a pinch.

The downside of course is that a 2-year stint in the Israeli Defense Forces might be required as well.

Belgium

Three years of residency in Belgium qualifies you for naturalization. “Residency” is quite flexible—you don’t actually have to spend time there, especially if you move around the borderless Schengen area.

As long as you demonstrate some ties to Belgium – family, business, property, paying taxes – you’ll be able to get citizenship.

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September 25, 2014
Sovereign Valley Farm, Chile

It was only 18-months ago that one of the brokest banking systems in the world became the first modern example of financial cannibalism.

I’m sure you remember how it all went down in Cyprus last year… but I’ll review it anyhow because it just never gets old.

For days, weeks, months leading up to the big event, banks were operating as usual. People could log on to a bank website, check their account balance, and see a number printed on the screen.

As it turns out, though, there’s a huge difference between a number on a screen and a well-capitalized bank.

Cypriot banks didn’t actually -have- the money. They had huge liabilities, minimal assets, and were roundly insolvent.

Worse, they no longer had the ability to borrow money. Cyprus is part of the eurozone, and consequently, its central bank didn’t have the ability to print money in order to bail out the insolvent banking sector.

The government was too broke as well. So finally, devoid of options and forced to face its financial reckoning, Cypriot banks were shuttered for an extended ‘holiday’, and every person in the country had his/her bank account frozen.

People went to bed one evening last March and they assumed everything was fine. They woke up the next morning to find that they no longer had control over their savings. The money they -thought- was there was actually wasn’t. Their account balance was a gigantic lie.

Suddenly they had no means to pay the rent. Buy food. Fuel. Everything was on lock down.

Even after the freeze was lifted, Cyprus spent more than a year suffering through debilitating capital controls. If you wanted to send some extra cash to your son or daughter studying abroad, you had to submit your request to a committee.

This was clearly the height of economic freedom.

Now it’s been 18-months. And as we told you in July, things haven’t changed much. The capital controls have largely been lifted, but Cypriot banks are as broke as ever.

Two months ago, the country’s largest bank (Bank of Cyprus) was forced into selling shares in order to raise more capital. Surprise, surprise, the bank was still poorly capitalized.

There were hardly any takers, and the European Bank for Reconstruction and Development (EBRD), a supranational government financial institution, had to step in and take a huge chunk of the new shares.

The latest news is that the country’s central bank sent a letter to Bank of Cyprus on Monday, publicly ‘requesting’ that the bank’s -entire- board of directors resign.

This is clearly another favorable sign.

The lesson here is pretty obvious; these problems don’t just happen overnight. Banking systems (and nations) go broke after years… decades… of bad decisions.

And it’s not something that can be turned around after a few months of capital controls and clever propaganda.

There’s something rotten in the system itself. And nothing gets fixed until there’s a complete reset. Anything else is just a snake oil solution that kicks the financial reckoning can down the road.

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September 25, 2014
Sovereign Valley Farm, Chile

For the last four years we’ve been railing against the Foreign Account Tax Compliance Act as one of the dumbest, most arrogant laws ever passed in the history of the world.

FATCA, as it’s known, was signed into law in 2010 in an effort to ‘clamp down’ on tax evasion. That’s the official story.

There’s no shortage of statistics out there which say there’s anywhere from $21 to $32 TRILLION ‘hidden in offshore accounts.’

I always retain a healthy skepticism of these numbers.

I mean, that’s 30% of the entire WORLD GDP. It’s more than TEN TIMES the amount that Google, Apple, and all the big tech companies are hoarding in cash (also overseas).

It’s more than SEVEN TIMES the size of the US Federal Reserve’s balance sheet. And it’s TWO THOUSAND TIMES the current M2 money supply of US dollars.

These estimates are seriously unrealistic, and I’m throwing the bullshit flag.

Regardless, FATCA was passed, and the claim was there would be no more tax evasion as a result due to the two main provisions in the law.

The first provision requires all US taxpayers to make yet another disclosure to the IRS via form 8938 of certain foreign financial assets and foreign financial accounts they may be holding overseas.

Nevermind that US taxpayers already make these disclosures in other forms (FBAR, 1040 Schedule B, etc.) So this is really just a waste of time and resources.

But the really insidious part of FATCA is the second provision. It requires EVERY single bank on the planet to enter into an information-sharing agreement with the IRS.

So even some bank in rural Bangladesh that’s never seen a foreigner before has to jump into bed with the IRS and agree to share information.

(Bear in mind– this is a one-way street. The IRS is RECEIVING information from banks, but not sharing any itself. Nice.)

What’s more, banks which don’t sign up effectively get blackballed from the US banking system via a 30% tax levied on all funds that non-compliant banks route through New York.

The really absurd part is that every bank in the world is supposed to simultaneously keep track of whether or not every other bank in the world is compliant. Non-compliant banks are supposed to be shunned by the rest of the community like bad little boys and girls in time out.

This is so adolescent and puerile; the US government is drawing dividing lines and putting banks into little cliques to see who will be the teacher’s pet.

Ever since the law got passed, foreign banks have been rightfully freaking out. What the US government is asking is borderline impossible.

And at this point, now that most of the provisions have kicked in, no one has any idea what they’re supposed to be doing, and what they’re supposed to be reporting to whom. It’s a total disaster.

Enter the scam artists.

Some very clever identity thieves have figured out that this is a goldmine. They’re ringing up banks all over the world pretending to be IRS agents and soliciting blanket information on account holders.

Foreign banks are intimidated enough by even the mention of those three letters that many of them are coughing information.

The IRS has just admitted as much, sending out an urgent fraud alert that “scam artists posing as the IRS have fraudulently solicited financial institutions seeking account holder identity and financial account information.”

Oops.

Needless to say, none of this would have happened if FATCA hadn’t been passed.

These people have spent so much time, energy, and resources to combat tax evasion. They’ve created a new enemy– a faceless rich man hiding $21 to $32 trillion offshore. To me this is as mythical and absurd as men in caves who hate us for our freedom.

All that said, if they had just spent a tiny fraction of that energy on overhauling the tax system, none of these steps would even be necessary.

Their only tactics are to whine, complain, make up statistics, and intimidate people. Now, with the latest tax issue due jour being corporate inversions, they’ve taken to circumventing the law altogether and issuing royal decrees.

It’s a far cry from actually trying to govern responsibly and intelligently.

Estonia is awash with cash with minimal debt. Yet they have some of the lowest, friendliest taxes in the world. They attract businesses. And, go figure, there’s no problem with evasion. They don’t have to waste a penny chasing down Estonian tax evaders.

There are other examples all over the world. As a sad testament, even Russia has a low 20% corporate tax and a flat 13% individual tax rate.

There’s a simple rule here: governments can choose to be smart, or they can choose to be scary. The Land of the Free has very clearly decided on its path. And the consequences are piling higher by the day.

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September 24, 2014
Sovereign Valley Farm, Chile

In the days of ancient Rome, it was tradition for the upper class to liberate their slaves after a set number of years.

The Roman government, however, looked at this as an opportunity to generate revenue, and they taxed the newly freed slave on his freedom.

I can’t imagine anything more repulsive than paying tax on freedom. But they gave it a pretty good try–

In 1696, the English government under William III (William of Orange) passed a new law requiring subjects to pay a tax based on the number of windows in their homes.

Not willing to pay such a ridiculous tax on something as basic as sunlight, many Englishmen simply reduced the number of windows in their homes.

There was less light… and less ventilation… which ultimately became a public health problem.

To follow that up, England introduced a tax on candles in 1789. Making your own candles was outlawed unless you first obtained a license and paid tax on your own homemade candles.

As you could imagine, most people just did without.

Coupled with the window tax, this was a very dark time for England. And it took until the mid 19th century for the government to realize its stupidity and repeal the taxes.

But if that sounds excessive, consider the Johnstown Flood Tax.

In 1936, the town of Johnstown, Pennsylvania was devastated by nasty flood, and in its efforts to ‘do something,’ the state assembly imposed an emergency, ‘temporary’ tax of 10% on all alcohol sold in the state.

This ‘temporary’ tax remained in place for nearly three decades, at which point it was raised to 15% in 1963, and again to 18% in 1968.

The ‘temporary’ tax still exists today, proving once again that there’s nothing more permanent than a temporary government measure.

Curiously, you can never find the tax on an alcohol receipt; state law requires that the tax be built into the price. So all alcohol simply costs 18% more in Pennsylvania, and most people don’t even know that they’re paying it.

But if that sounds ridiculous, consider that the city of Pittsburgh charges a 5% “amusement tax” on anything that offers entertainment in the city.

I was curious how the government, in its sole discretion, defines ‘amusement’. Well, it turns out there’s quite a lengthy definition, which includes

“concerts, moving picture shows, vaudeville, circus, carnival and side shows. . . wrestling matches, boxing and sparring exhibitions. . .”

Naturally. How could the great city of Pittsburgh possibly function if the government wasn’t out there grabbing its tax dollars from vaudeville and sideshows…?

But back in the United Kingdom, the government taxes you on entertainment even if you stay home through its television tax.

In the UK if you own a television in your home, you must pay an annual fee, formally called a television license, for each television you own.

The funds are used to finance programming on BBC, whether you watch those channels or not.

Color (or I should say ‘colour’) televisions are taxed at a 145.50 pounds annually, whereas black and white TV sets (seriously?) are taxed at 49 pounds per year.

Blind people still have to pay the tax, but at a reduced rate of 50%. How generous. And of course, failure to pay this fee subjects the violator to criminal penalties.

There were 155,000 convictions and fines in 2012 alone. And 51 people actually went to prison that year for failure to pay the TV tax.

You just can’t make this stuff up…

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September 23, 2014
Sovereign Valley Farm, Chile

When I landed at Addis Ababa airport in Ethiopia again last month, the first thing that struck me was how much everything was… Chinese.

Far and away, most of the passengers at the airport arriving from various destinations were Chinese. Many of the signs were in Chinese. There were even some Mandarin-speaking hotel operators standing by to assist travelers.

Granted, Chinese investment plays a very dominant role in Africa, and those countries are adapting.

But more importantly, it’s a sign of the times. China’s growing influence cannot be ignored.

The country is coming to dominate international finance. Geopolitics. Oil. Consumer items. And now travel.

Years back I remember the first time I came across the stereotypical busload of Chinese tourists.

It was in Paris, and I was somewhere near the obelisk, when a bus pulled up and out popped a Chinese tour guide leading the charge with a flag and loud speaker, and closely followed by a stream of very conspicuous tourists.

They bustled past me with their matching yellow hats and cameras in ready position to make their way to where the guide pointed out as a good place to take their pictures. Shuffling around each other, taking turns with the photo-op, they were as oblivious about their surroundings as could be.

Then, no more than five minutes later they were back on the bus and off again.

This was just how Chinese tourists were. They were known for coming in by the busload, clinging to the group, and eating at Chinese restaurants rather than local ones.

If it weren’t for their compulsory picture with each monument, it was almost as if they weren’t really there in the country.

But, I’ve noticed that I rarely see that anymore.

Now I’m seeing Chinese travelers in pairs or with their families. I’ve come across them in places I wouldn’t have expected, like Nairobi and Riga, and they are wandering around exploring on their own like most tourists.

In 2013, the number of outbound Chinese tourists rose to 98.13 million, which is more than 150% the number of American tourists. It’s expected to exceed 100 million this year.

Remember, this figure is despite lower average incomes and the fact that Chinese need visas to go pretty much anywhere except small island nations such as Palau and Vanuatu. So their desire to travel is undoubtedly fierce.

However, what’s amazing is not so much the rise of Chinese outbound tourism itself, because that was to be expected as the country became more open to the world and living standards improved.

What I find remarkable are the people positioning themselves to take advantage of this huge new market.

You don’t see it as much in the US and Europe, perhaps from stubbornness or some false sense of superiority. But elsewhere people are rapidly adjusting to accommodate the needs of this new wave of customers.

Even as far back as 2003, I recall visiting Cairo with a Chinese friend of mine and Egyptian shopkeepers calling out to him from tiny shops in the bazaar in Mandarin.

And it’s not just that they knew how to say “ni hao”, but they could actually bargain in Mandarin. And bargain hard. My friend was stunned.

These shopkeepers didn’t have to major in Chinese, or even business for that matter, but they knew an opportunity when they saw it, and positioned themselves to take advantage of it.

They didn’t complain that the market is changing so they need government funding to re-train them. They just did it.

That was over ten years ago. Chinese tourism has grown nearly 400% since, and is just starting to pick up speed.

As of 2012, the overseas consumption of Chinese travelers has reached a record $102 billion and Chinese have thus overtook the Germans to become the world’s biggest spending tourists.

This is a massive trend that few people are really paying attention to. Those that do and focus their business on catering the Chinese traveler are going to make an extraordinary amount of money.

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September 22, 2014
Santiago, Chile

If someone mentions the Dotcom Bubble, Pets.com is easily the first thing to come to mind.

The online pet product store failed hard and it failed fast. In just 268 days, the company went from IPO to liquidation, managing to lose $300 million in the process.

Yet it had looked good to investors, at least for a while.

Pets.com spent exorbitant amounts of money on advertising; its sock-puppet mascot was the 90s equivalent of a viral phenomenon.

But while the company spent hand over fist on advertising, Pets.com’s was losing money on every sale because they priced their inventory at BELOW cost. Duh.

Pets.com went public on the NASDAQ in February 2000 (right as the bubble burst) at $11 per share.

The stock peaked at $14, valuing the company at over $300 million. Not bad for a company whose business model virtually assured they would lose money.

But reality set in just nine months later. The company’s stock fell over 99%, and management announced they would liquidate.

Now… we could criticize Pets.com management all day long for a ridiculous business model. But bear in mind, investors bought the story.

People believed that profits didn’t matter. And back then it was typical for loss-making companies to be valued at hundreds of millions of dollars.

Have things really changed since then?

Facebook bought revenueless Instagram for $1 billion in 2012. Snapchat, the revenueless sexting app, is now valued at $10 billion.

There are so many examples like this. And like 1999, no one seems to care.

Silicon Valley investors keep writing huge checks. “Likes” are the new valuation metric. Not profits.

Several top Silicon Valley insiders are now hoisting the red flag saying enough is enough.

Bill Gurley, one of the most successful venture capitalists in the world, told the Wall Street Journal last week that “Silicon Valley as a whole . . . is taking on an excessive amount of risk right now. Unprecedented since ’99.”

Fred Wilson of Union Square Ventures echoed this sentiment on his blog, railing against the widely accepted model that it’s acceptable for companies to be “[b]urning cash. Losing money. Emphasis on the losing.”

George Zachary of Charles River Ventures wrote, “It reminds me of 2000, when investment capital was flooding into startups and flooded a lot of marginal companies. If 2000 was a bubble factor of 10, we are at an 8 to 9 in my opinion right now.”

As with all bubbles, it all comes down to there being too much money in the system.

Capital is far too cheap, and that pushes people into making risky and foolish decisions.

When you’re guaranteed to lose money on a tax-adjusted, inflation-adjusted basis by holding your savings in a bank account, almost anything else looks like a better alternative.

That’s why stocks keep pushing higher, why junk bonds yield a pitiful 5%, and why bankrupt governments can borrow at 0%.

Jared Flieser of Matrix Partners in Palo Alto summed it up when he told the Wall Street Journal, “You can’t afford to sit on the bench.”

In other words, money managers view NOT investing as losing, even if investing means taking huge risks.

It’s an abominable position to be in. If you do nothing, you lose. If you do anything, you take on huge risks.

This, of course, is thanks to a monetary system in which a tiny central banking elite conjures trillions of dollars out of thin air in its sole discretion.

History tells us that this party eventually stops, creating all sorts of unpleasant financial carnage. This has happened so many times before, and it would be arrogant to presume that this time is any different.

But it begs the question: what does one do? Is it worth trying to ride the bubble and try to get out before it all collapses?

Perhaps. But there are still pockets of value in the world that I would submit are more secure places to be.

In public markets, the junior mining sector has many companies that are trading for less than their tangible cash value. It is the exact antithesis of Pets.com.

In private markets, Startups in other thriving communities around the world (from New Zealand to right here in Chile) are valued at much more appropriate levels.

For yield, we’ve seen US dollar bank accounts in certain parts of the world paying upwards of 7%, and one low-risk company owned by the debt-free government of Singapore issuing bonds yielding over 5%.

There are options.

It’s like music. A lot of people think that music is dead. Where are today’s Led Zeppelin, Pink Floyd, Grateful Dead, Bob Marley, and Bob Dylan?

And based on the crap spewed out over the centralized, corporate-controlled radio, they’d be right.

But music is definitely not dead. There’s some amazing stuff out there. The corporate titans that control the system aren’t going to play any of it for you.

But it’s there. Just like the great investments. You have to look where no one else is looking. And you have to dig a little bit more to find gold.

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September 22, 2014
London, England

[This letter was written by Tim Price, frequent Sovereign Man contributor and Director of Investment at PFP Wealth Management in the UK.]

Several years ago we highlighted the work of Leopold Kohr. Kohr was an Austrian Jew who only narrowly escaped the Holocaust.

The village in which he was born, Oberndorf in central Austria, with a population of just 2,000 or so, would come to exert a disproportionate influence on Kohr’s thinking.

Kohr went on to study at the LSE with the likes of fellow Austrian thinker Friedrich von Hayek. In 1938 he left Europe for America, a place he would make his home for the next 25 years.

In September 1941, just as the mass murder of the Jewish inhabitants of Vilnius was beginning, Kohr wrote the first part of what would become his masterwork, ‘The Breakdown of Nations’.

In it he argued that Europe should be “cantonized” back into the sort of small, political regions that had existed in the past and that still persisted in democratic hold-outs like Switzerland.

It all comes down to scale. As Kirkpatrick Sale puts it in his foreword to ‘The Breakdown of Nations’,

“What matters in the affairs of a nation, just as in the affairs of a building, say, is the size of the unit.

“A building is too big when it can no longer provide its dwellers with the services they expect – running water, waste disposal, heat, electricity, elevators and the like – without these taking up so much room that there is not enough left over for living space, a phenomenon that actually begins to happen in a building over about ninety or a hundred floors.

“A nation becomes too big when it can no longer provide its citizens with the services they expect – defence, roads, post, health, coins, courts and the like – without amassing such complex institutions and bureaucracies that they actually end up preventing the very ends they are intending to achieve, a phenomenon that is now commonplace in the modern industrialized world.

“It is not the character of the building or the nation that matters, nor is it the virtue of the agents or leaders that matters, but rather the size of the unit: even saints asked to administer a building of 400 floors or a nation of 200 million people would find the job impossible.”

Kohr showed that there are unavoidable limits to the growth of societies:

“..social problems have the unfortunate tendency to grow at a geometric ratio with the growth of an organism of which they are a part, while the ability of man to cope with them, if it can be extended at all, grows only at an arithmetic ratio.”

In the real world, there are finite limits beyond which it does not make sense to grow.

Kohr argued that only small states can have true democracies, because only in small states can the citizen have some direct influence over the governing authorities.

When asked what had most influenced his political and social ideas, Kohr replied:
“Mostly that I was born in a small village.”

The euro zone in particular is an object lesson in an unwieldy, oversized, dysfunctional political construct haphazardly cobbled together among irreconcilable cultural entities.

Wherever something is wrong, wrote Kohr, something is too big. The answer is not to grow, embracing even more disparate states within a failing currency union with make-it-up-as- you-go-along rules. The answer is to stop growing.

The answer to the ‘too big’ problem lies not in ever greater union, but in division.

And if the larger states in Europe ultimately decide that the political union is more than their electorates can bear, and that what they really want is to slaughter each other, they should not expect the United Kingdom, once again, to wade into the abattoir and sacrifice its own in the process.

“We have ridiculed the many little states,” wrote Kohr, sadly; “Now we are terrorized by their few successors.”

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September 15, 2014
Santiago, Chile

It was known as Directive 10-289, and it was the government’s last-ditch, desperate effort to control the collapsing economy.

The President, along with some of his senior advisors at the Bureau of Economic Planning and National Resources, all widely agreed that the only way out of the crisis was expand government power.

The directive was passed quickly, and among its key provisions:

“Point One. All workers, wage earners and employees of any kind whatsoever shall henceforth be attached to their jobs and shall not leave nor be dismissed nor change employment. . .”

“Point Two. All industrial, commercial, manufacturing and business establishments of any nature whatsoever shall henceforth remain in operation, and the owners of such establishments shall not quit nor leave nor retire, nor close, sell or transfer their business. . .”

If you’re searching through your favorite news feed right now wondering why you haven’t heard of Directive 10-289, it’s because the law is fictitious. It’s part of the story from Ayn Rand’s Atlas Shrugged.

At that part in the book, the economy was in a full blown crisis.

The government had engineered one emergency after another, and their only idea to ‘fix’ things was to award themsleves even more power and control over the economy… specifically to freeze everything in place.

No one could be fired or quit his/her job. And no business could stop working. It didn’t matter how much money they were losing.

Crazy idea, right? This could never happen in reality… at least not in the West. It sounds like something straight out of the Soviet Union– forcing unprofitable companies to stay in business.

Enter H.R. 5445, the “Postal Jobs Protection Act of 2014″.

I was utterly stunned when I read this. The meat of the bill consists of just 26 words:

“Notwithstanding any other provision of law, no mail processing facility operating as of September 1, 2014, may be closed or consolidated prior to December 31, 2015.”

Let that sink in a minute: they want to pass a law to ensure that NO US postal center can be shut down through the end of next year.

For the sake of context, let’s walk through the numbers.

In its most recent quarter, the US Postal Service lost a massive $1.9 BILLION. That’s far worse than the $699 million loss they rack up over the same quarter last year.

And so far this fiscal year, USPS has lost over $4 billion.

What’s more– the post office has maxed out its $15 billion credit line. They have almost no liquidity left to continue financing operations, they’re not profitable, and they have no capacity left to borrow more money in order to plug the shortfall.

Perhaps most alarming is that, according to the US Postal Service’s own financial statements, its NET worth (i.e. assets minus liabilities) is NEGATIVE $44 billion.

This doesn’t happen by accident. And it’s not the result of some temporary downturn. It takes years… decades of mismanagement and structural issues to reach this point.

Just for kicks, I compared 2-day shipping rates among major carriers in the US for a simple envelope package.

FedEx: $25.12
UPS: $24.16

And the US Postal Service? $5.05 if I order online.

Duh. It doesn’t take a rocket scientist to see the problem here.

Bear in mind that FedEx and UPS are, you know, profitable, earning $3.3 billion and $6.7 billion in pretax income, respectively. (And they each paid an effective tax rate of more than 35%.)

Curiously, when I was in Ethiopia a few weeks ago, there was an article in the local paper there about how profitable the Ethiopian postal service had become.

I mean– postal services around the world have the same problems. A place like Ethiopia has a massive rural population, and it costs a lot to maintain those small offices. Everyone face rising fuel costs and declining volume.

Yet even in Ethiopia they’ve figured it out. They know they can’t continuously run an unprofitable operation, so they reinvent the business model. That’s life.

In fairness, the Postal Service knows what to do. They’re at the end of their rope. And if they’re going to survive, they need to raise revenue and cut costs dramatically.

This includes the uncomfortable prospect of laying off employees and closing down unprofitable processing centers.

But Congress doesn’t want that. And they’re lifting legislation directly from the pages of Atlas Shrugged to ensure the post office keeps operating at a loss.

This is yet another example of incredibly dangerous central planning being planned, proposed, or in progress in the Land of the Free.

Can you see where this trend is going?

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September 18, 2014
Santiago, Chile

Imagine coming home from work and finding that a group of men have broken into your house. What do you do?

I have a gratified feeling that for an increasing number of our readers, the answer would be to draw their firearm and defend the home.

But it’s safe to say most folks would… call the police.

This happened in Greece recently, as recounted to me in an email by a colleague who was visiting his family in a rural, seaside town in the country’s southern mainland.

There’s recently been rash of home burglaries in the village– a remarkable turn of events for a place accustomed to leaving windows and doors unlocked.

In one instance, a local resident came home and spied a thief in progress; he immediately called the police to dispatch a unit as quickly as possible. And the police reportedly told the man, “We haven’t enough fuel to come out there right now.”

It shouldn’t come as a surprise to hear that public services are being cut back in Greece given how messed up their economy is.

But protecting citizens against crime is supposedly one of the sacrosanct terms of the social contract.

Citizens around the world have exchanged their freedom for security. It’s a completely absurd trade. . . but nevertheless it’s happened.

And in doing so, governments have essentially monopolized the security business. By and large, police and security are public services provide exclusively by the government.

And supposedly the taxes that we all pay go to fund those services. . . ensuring that someone from the government will come and ‘save’ us when the bad guys approach.

That’s the promise, at least.

But in difficult economic times, bankrupt governments routinely set aside promises they’ve made to taxpayers.

They slash pension (social security) benefits or use funky gorilla math to understate cost of living increases.

They completely violate the sacred vow of maintaining a strong, sound currency.

And they drastically reduce or even eliminate funding for critical services that people have come to depend on.

Of course, this situation isn’t unique to Greece. Every bankrupt nation reaches this point sooner or later.

Recently in [bankrupt] Argentina, a single police officer was left in charge of an entire jail in the Buenos Aires area which was housing several dozen prisoners.

The lone officer, who was clearly in over her head and poorly trained, heard suspicious noises somewhere in the building. So what did she do? She (a police officer) called the police.

Argentine media has published a recording of the officer’s 911 call, where the emergency dispatcher told the officer to get a colleague to ‘try and stop by.’

Oh hey, I hope you’re not too busy issuing parking tickets and providing security for thieving politicians– would you mind making sure we don’t have a prison break on our hands?

But the police officer’s response really reveals just how desperate the situation is, “I have only one vehicle to patrol the whole district.”

Again, these aren’t isolated events. This is a major trend that is due to befall any bankrupt government.

Think about it: are we really so arrogant to believe that a bankrupt government can continue to borrow money forever without consequence?

Bottom line: independence is key. You cannot rely on a bankrupt government to provide the services that they promise.

That goes for anything… from providing basic security to insuring bank deposits to paying out Social Security benefits.

They simply don’t have the financial means to make good on their promises.

And this is a reality that’s important to recognize and prepare for before it’s too late.

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September 17, 2014
Talca, Chile

[Editor’s Note: This is the first in a multi-part series on some of the top Startup ecosystems in the world]

When Chris D. came up with a great idea for his startup he was already thinking outside the box.

But his innovation didn’t stop there. His thought process extended far beyond the business idea into WHERE to best execute his plan.

He was already established in New York. And had he followed the conventional wisdom, that’s where he would have set up shop.

But then again, doing things differently and better than others is the hallmark of a great entrepreneur.

Comparing costs, lifestyle, and entrepreneurial environments, he found that by leaving the country he could have stronger opportunities and a better work environment for half the cost.

And it was anything but a sacrifice.

Trading in a tiny flat in Manhattan, he and his co-founder were able to rent a 6-bedroom penthouse apartment, complete with a pool, gorgeous views, and a maid.

Yes you read that right, a maid.

Honestly, what could be better for focusing on your big idea than not having to think about cooking and cleaning?

Bootstrapping your startup is definitely a lot of work, but that doesn’t mean it can’t be fun while you do it.

And it’s not just about your lifestyle, but the business environment as well.

The goal isn’t of course to find just the cheapest place in the world to live. You also want to find a place where you can start a business quickly and easily, and where there is low taxation and availability of the talent you need.

It’s great that a number of cities around the world are hotly competing to become the next Silicon Valley.

In the process, they are creating excellent and exceptionally welcoming environments for new businesses.

They want you to start your business there, so they are going out of their way to entice entrepreneurs with better working spaces and greater access to mentorship and capital.

This is exactly what’s happening in Medellín, Colombia, which is where Chris chose to launch his startup. (Surprise!)

Named by the Wall Street Journal as the most innovative city in the world in 2012, Medellín has so much to offer budding entrepreneurs.

People are coming from around the world to be a part of Medellin’s environment of openness and opportunity, enhancing these aspects even further.

And the Colombian government is actively making it easier foreigners to live and work in the city, and to encourage business and entrepreneurship as well.

Medellin’s startup ecosystem now consists of numerous incubators, co-working spaces, and networking events.

And supplementing the vibrant nightlife and social scene of Medellín, you can keep busy with regular events specifically designed for entrepreneurs, hosted weekly by groups like CoffeeGrid and the Medellin Entrepreneurship Society.

Both domestic and international ventures that come to the city can dive in to this strong network of entrepreneurs.

And if accepted to an incubation program, foreigners can benefit even further from the available mentors and facilitated access to VC funding.

Why spend your time fighting upstream, struggling to cover expenses and to get noticed in a far more saturated arena?

There are better, more innovative ways to make it happen.  After all, that’s what startups are all about.

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