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SOVEREIGN MAN

What’s a young person supposed to do?

Date: October 28, 2011
Reporting From: Tokyo, Japan

IMG 0199 Whats a young person supposed to do?

The view this evening in Tokyo's Shinjuku district; that's Mt. Fuji in the background.

I can’t begin to describe how excited I am to be visiting Tokyo while the Japanese yen is at its all-time, historic high. My timing couldn’t possibly be worse.

For reasons that are completely incomprehensible, the yen is still viewed as a stable ‘safe haven’ currency despite four completely hopeless black marks:

1) Japan’s public debt puts other bankrupt nations to shame. As a percentage of GDP (225%), Japan’s debt is more than twice as bad as the United States.

2) The political situation in Japan is anything BUT stable. Japan has blown through 6 prime ministers and 9 finance ministers since 2006. And every one of them was a failure.

3) Social demographics are a ticking time bomb. Both life expectancy AND average age in Japan are higher than just about anywhere else on the planet… and the country has neither the work force nor the financial resources to support the massive waves of retirees that are coming.

4) Oh yeah, Japan’s economy hasn’t actually grown in two decades. No biggie.

Despite these obvious headwinds, though, the market is telling us that Japan is the safe place to be right now. And as a result, prices here are just plain stupid.

I’ll have more to report on this next week, plus a boots on the ground perspective of what’s going on in Fukishima. Hopefully I won’t grow a sixth finger.

And without further ado, let’s move on to this week’s questions.

First, Elle asks, “Simon, I am a female senior in high school and am trying to figure out what to do next year. Since the future of America is unstable, what would you do if you were in my shoes?

Young people in bankrupt western nations do not have a particularly bright future. To put it bluntly, society is going to force-feed you a shit sandwich. Higher taxes, more debt, fewer prospects, and a much lower standard of living await you. That’s if you stick around.

You probably won’t be surprised to hear me say this, but I think that young people ought to consider getting out of dodge. The world is a big place and it’s full of opportunities. Following the old way of ‘study hard, go to a good school, get a great job, and work your way up the ladder’ is completely dead.

Success today, whether it’s in a job or owning a business, is all about creating value– what can you do that’s so valuable to someone else that they’re actually willing to pay you for it?

When you’re in a developed country surrounded by hundreds of millions of people who share similar skills, it can be a bit competitive to do this. But if you take off for a developing country, you might be the only person in town who can do a number of things that might seem like second nature to you.

The great thing about being young is that you have nothing to lose and everything to gain. It’s the only time in your life that you won’t be saddled with other responsibilities.

As for WHERE to go? Part of it is a lifestyle choice… where do you want to be? But most of all, look where the growth is. Asia, Africa, Latin America. You’ll find a happy medium that strikes a balance between growth opportunities and your personal desires.

I wrote about Mongolia last week, there are fortunes to be made there. If you’re a real wild man, try South Sudan… they’ve been a country for all of three months. If you want a steady job and work experience, try China or Singapore.

Most of all, just expand your horizons and start to consider possibilities all over the world. Ignore your friends and family, they’ll just try to talk you out of it. And then, in a few years’ time when you’re wildly successful, they’ll pretend like they supported you all along.

Next, Raoul asks, “Simon, what do you think of these stability plans in Europe? It seems like things are starting to calm down a little bit.

Such is the sorry state of the global financial system… the market rallies when it is decided that Greece will default on ‘only’ 50% of its obligations.

Unfortunately, this doesn’t really fix anything.

Greece is still losing money hand over fist like a drunken playboy at the craps table. Even if the government didn’t have to pay a cent in interest, the budget is still down billions of euros, month in, month out.

As we discussed yesterday, this is nothing new. Greece has been in this position five other times in the past two centuries. This tactic is called ‘selective default’, and it doesn’t work in the long-term because the structural problems still remain. Eventually, they’ll bring out the economic torture devices.

Stefan Homburg, one of Germany’s few contrarian economists, recently summed this up to the German paper Sueddeutsche:

“History shows that [bankrupt governments] take radical measures such as expropriation of private assets, wealth taxes, or banning gold ownership… and in a state of emergency, basic rights are suspended.”

This quote succinctly articulates why international diversification is so important.

Next, Dr. Lynch asks, “Simon, I have Italian grandparents.  Do I have a chance to obtain a passport? If so, do you have a contact recommendation like you had for the fellow seeking a Polish passport?”

Citizenship by ancestry is the best, fastest, and cheapest way to obtain another passport. Italy is one of the countries that allows this, and if you have Italian ancestors, I’d suggest getting started here.

Last, I want to remind all Sovereign Man: Confidential members that our monthly teleconference is on Monday. We’ll have a full presentation of the new FATCA (Foreign Account Tax Compliance Act) rules, and you won’t want to miss it.

If you haven’t signed up yet for SMC, this teleconference is an absolute must. To get access, just sign up for a risk-free trial here.

About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

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Comments on this entry are closed.

  • Michael in New Mexico

    Simon, thanks for all your posts.  I’ve been following you for a while now.  I consider myself a libertarian/anarchist and live in the US.  I myself at 46 am seriously considering moving out of the US within 6 years (I have some prep work to get wrapped up).  I’m hoping the stuff doesn’t hit the fan before then.  Keep up the good work! 

  • Aryannomad

    South Sudan…Seriously?

  • http://www.notanotheraveragejoe.com/ Another Joe

    Good advice for the young here. In my fifth decade I’m striving to get my responsibilities to the point that I can begin working in another country. I’m finding it terribly daunting and have often told young people to learn languages and use your youth to learn more about how the world works. This is becoming more true as the American dream may very well turn into a nightmare for some.
    I would offer a caution to Simon’s advice to Elle though. It’s apparent that the advice given was generalized, especially since he wrote, “If you’re a real wild man” to this female high school senior. With this in mind, I also perceive that he’s generalized in advising youth to ignore family and friends. Because of my contrarian outlook and pursuits, I’ve had to step away from the advice of family and friends often over the years.
    However, especially as a young lady, I would strongly urge you to seek your father’s blessing in whatever you pursue. Ask him for his advice and help. Ask him to help you chart a course. Unless he’s an absolutely terrible father, nobody on earth has more interest in your well-being than your own father. And if, in your travels, you find yourself in trouble, there’s nobody who is more apt to move heaven and earth to see you safe than your own father. Don’t ignore him.

    • Hotmale_uk66

      No offense but parents aren’t always the best one’s for advice. I am sure if that girl went to her father he would tell her not to go and America will get better.
      In my European travel days, I met loads of Americans studying in London, Paris and Rome.
      If the young lady wants to see the world, maybe working for an Embassy or Foreign Service would be the best way to go.

  • nick

    What’s a young person suppose to do?

    Easy.

    Stop watching TV.

    Read.

    Learn a skill.

    Vote for Ron Paul.

    Learn how to handle a gun.

    Leaving the country sure is a hard idea to swallow but not a bad one. Anyone opposed to it has never gone to another country.

  • amerikanka

    If I were young myself or giving advice to a high school senior, I’d look into drug counseling/rehab work. In the US, addiction is showing no signs of slow-down, and there are plenty of positions that do not require an M.D. 

  • Elle

    Thanks Simon. I am thinking of taking a gap year to at least help solidify some languages I am learning. And if you are ever looking for or in need of an apprentice I am so there :) 

  • jondaw

    Why Japan?  Well, it helps that it is the third largest economy in the world, despite its non-growth. Besides, things can’t grow forever, contrary to what illogic would dictate. Japan’s achilles heel is not its superficial political “instability”–it is no banana republic–but its dependence on imports of raw materials and above all on oil. Fukushima revealed Japan’s essential and profound vulnerability.

    The crisis of the 90′s there resulted from too rapid a growth coupled with low ROI. Japan’s solution is in accordance with its culture: its priority is full employment and not growth–however heretical this may seem to us–hence the high deficits and low interest rates.

    However, regarding its “debts”, Japan is sovereign in its currency, therefore its “debts” are largely denominated in the currency which it itself issues as the monopoly issuer. It does not need to raise capital or export to pay off these debts. It amazes me how people just cannot wrap their heads around the realities of sovereign non-convertible currencies. They are mired in the rather primitive superstition that money is a “thing”, and in particular 
    they are mired in a financial paradigm that is literally non-existent, since it pertains to the pre-Bretton Woods era of convertible currencies. Most economists haven’t got a firm grasp on central banking and central banking operations. 

    See:

    Modern Monetary Theory—A Primer on the Operational Realities of the Monetary System, by Scott Fulwiller

    http://www.moslereconomics.com/wp-content/graphs/2010/08/MMT-Scott-Fullwiler.doc

    Modern Central Bank Operations—The General Principles

    http://www.cfeps.org/ss2008/ss08r/fulwiller/Fullwiler%20Modern%20CB%20Operations.pdf

  • Jax Teller

    I love this website. I check it every day. Getting a second passport: SMART. Setting up your opportunities in another country, especially if you are young and have the ability: SMART.

    But doing so because Japan is screwed, America is screwed, Europe is screwed. Really?

    Japan has been in a dismal economic state as long as I can remember. For decades prices have been high – I visited in 1990 and it was just as ridiculous as mentioned in this article. It is what it is.

    Greece is screwed. That’s supposed to be new news? They have always been screwed.

    Greece has only survived by the grace of its good friends since 40 BC. Julius Caesar supported it, other countries supported it, all the way through Ronald Reagan who supported it because of his terror of the Soviet Union. Since then, the Eurozone has supported it. So everyone since 40 BC has known that Greece is what it is: a beach resort on the Mediterranean. Nothing more, nothing less. They won’t invent the next Google. They won’t create anything, produce anything or pioneer anything. Maybe they’ll pay down their debt, maybe not. And then China will support it. Who knows? But their issues, which have been known for 2000 years, aren’t some bellweather of impeding doom.

    I read (in one of the Market Wizards books, I believe) of an investor in 2001 who dumped all his tech stocks (and made a killing) after he overheard a waitress at a dumpy diner talking about the tech stocks she had just bought. At that moment he realized that the turning point had arrived … when everyone starts to believe something, its time to believe the opposite.

    Everyone at this moment seems to believe the world is going to shayt. That alone makes me think that everyone is wrong.

    If you really believe the Euro is done, short option the Euro. Or the American dollar. Or the Yen. Or all of the above. You’ll make a fortune if you’re right.

    There are always opportunities out there – in this country or some other one. The herd is almost always wrong. You can make a killing in any economy if you think for yourself.

    • http://www.spontent.com Todd Dickerson

      What you’re missing is everyone *DOESN’T* think the world is going to sh*t.  It’s the exact opposite with 95% of Americans.  

      You’re on a veryyyy niche website, talk to people at average random cocktail parties (not niche ones with smart investors).

      They may have a little concern for US Debt and think their grandkids might not get social security, but that’s it, try convincing most people to buy gold or silver and dump their mutual funds… LOL…  

      If 5% of US citizens invested just 5% of their savings in gold, gold vaults would be empty tomorrow.  Virtually no one is preparing, sure its increased from 10 years ago, but we’re still talking about less then 20% of the population who could even explain what hyperinflation is or name the chairman of the Fed.

      You’re spending too much time online learning on niche sites such as this (jk) and not enough talking to average people, most of the US has no F’ing clue about what we (as Sovereignman, zero hedge, wealth cycles, etc readers) think of as common sense.

      • Zeronine

        You are so correct! I’m an ex-pat and my wife has so many ex-pat mama friends and invites me to these weekend get2gethers, and even these folks don’t have a freak’n clue! So far I haven’t met one person who invests in gold and that is pathetic. I’m in finance, so of course the conversation always leads down the same path, and once I open my mouth people cringe…. They just don’t like to hear the truth about the fiat-slave-system their living is a ponzi scheme that is slowly being exposed….

    • Th_lribeiro

      Greece being “screwed” is not news, Greece’s issues affecting Euro is news. Euro had never been tested as it is being now. The European Central Bank has never been tested as it is being now. Will the big boys (Germany, France, Netherlands) kick Greece out and kill the European unification dream? Will they save their banks and Greece’s credit?
      “(in one of the Market Wizards books, I believe) of an investor in 2001 who dumped all his tech stocks (and made a killing) after he overheard a waitress at a dumpy diner talking about the tech stocks she had just bought. At that moment he realized that the turning point had arrived … when everyone starts to believe something, its time to believe the opposite.” 
      I read something similar concerning 1929 Wall Street Crash. Good reason to dismiss it as one of many urban legends.

  • Claire

    QUESTION: COLLEGE ABROAD?                                                                                        
     Hi Simon,                I’m Claire, a naive college student in Washington, DC struggling daily to achieve self reliance and grant myself the wishes of my soul. I’d be ecstatic if you would lend me your advice.                First I would like to thank you profusely for taking the time to write your daily notes from the field. Your content is thoughtful and useful, and the emails serve as needed reminders for me to widen my frame of reference to this life.  It is too easy to get caught up in daily routines and feel trapped by our circumstances instead of aware of our options. And it is a shame not to explore our options in a world of truly endless possibility. So, thanks for bothering to share information with me and other people who haven’t done a damn thing for you. That’s pretty special. =)                Anyway, I wanted to ask about education abroad. I’m pretty frustrated with my situation here because I’m paying way too much and not learning a whole lot. I have a dream of graduating college without borrowing anything, which is starting to seem nearly impossible. My parents each make well over $50,000 a year, making them richer than at least 98% of the world. Now maybe it’s because their consumption is so high, their cost of living is high, everyone else around here is so rich, or all of the above (I told you, I’m naïve), but they can’t afford to send me to college. They have generously offered me $5,000 a year for two years. I am a waitress with a few thousand dollars to my name, and the education I want is still out of my reach by tens of thousands of dollars.                   I am not going to borrow that money from the government, because I don’t plan on getting a high paying job after graduation, and debt scares me silly. There are other things on my agenda after college besides working every day to pay off loans like an indentured servant. I will be playing my mandolin, volunteer-vacationing for three hots and a cot and seeking people who will teach me the skills I REALLY want to learn, the aforementioned wishes of my soul (which are mainly music and dance and circus-tricks type stuff if you’re wondering, luthiery, construction, boating, massage).                I need to get this degree out of the way first, though, as a rite of passage at the very least and to have my family’s respect. And I really do love learning and want to be in school. I’m halfway through with a major in International Business, though I’ve never left the USA. So, is there somewhere I can go to finish college where my money will be worth more? Where I won’t have to borrow anything? Where I might actually learn something too? Do you know of any options I may not have considered? Your opinions on taking loans would also be appreciated.                 I’m no good at this whole money game and I have to figure it out to assert my independence as a sovereign woman. I’d be so happy to hear any insights you may have on the college market. Thank you for your time.                                                                                                                                                Gratefully,Claire

  • jondaw

    Here’s one for you rugged contrarians to challenge your conventional thinking.

    Argentina: A Serious Challenge To The Euro And Economic Orthodoxy

    Latin America is supposed to be part of the new emerging world economy, and indeed, countries like Chile (mainly driving on a neo-liberal economic agenda) and more recently Brazil (having more of a social, redistributive market economy) have stolen all the limelight with stellar economic performances. However, the fastest growing economy by far the past decade has actually been another one, Argentina…

    it’s instructive to take stock what has happened to the Argentinian economy over the past decade. It’s in many ways such a remarkable case study that one can seriously wonder whether Argentina has defied the laws of orthodox economics…

    The Heritage Foundation classifies Argentina as the 138th free economy of the world. It is instructive to read the following from that classification:Recent growth has been driven mainly by the agricultural sector and exports of agricultural commodities. The strength of the economic rebound, however, may be held back by the government’s ongoing expansionary fiscal and monetary policies. [Heritage Foundation]Below it will be shown that both statements are flat out wrong. If you read the whole Heritage article on the classification, you expect that they’re describing a sort of economic waste land, not an economy that grew more than twice as fast as Brazil the past decade…

    The recovery is driven by consumption and investment (fixed capital formation), which account for 45.4 and 26.4 percentage points of growth, respectively…

    the past decade has been nothing short of stunning. Argentina has almost been a textbook case against economic orthodoxy, yet it enjoyed the fastest economic growth by far in Latin America and a growth that rivals that of China.

    Full article:

    http://seekingalpha.com/article/302886-argentina-a-serious-challenge-to-the-euro-and-economic-orthodoxy

  • johnG

    While you are in Tokyo take not of the mood of the people, its not all doom and gloom here despite the good points you’ve made above. As other commentators have said full employment is the focus which I think makes for a better society. how long they can keep it up for though who knows!

  • http://twitter.com/MichaelPorfirio Michael Mason

    “plus a boots on the ground perspective of what’s going on in Fukishima. Hopefully I won’t grow a sixth finger.”

    If that happens, you could always join the Yakuza and chop it off.

    - MPM

  • untouchable

    afterlife flag

  • http://twitter.com/JohnMcIntyre_ John McIntyre

    I’m 22 years old and recently moved to the Philippines for an internship at a resort. I hate the Western model of working 40 hours a week, just because everyone else does. So I came here. I guess you could say I’m on the path your preaching. I find it infinitely more rewarding to be living abroad than to live where I’ve always lived.

    As such, I love the idea of your blog. While most of the recommendations are somewhat out of my league for the moment (investment, second passports, and generally anything which requires a lot of cash), I’m listening and I’m making plans for the future. Keep up with it! And if you’re ever in the Philippines, come say hi.

  • gavincali

    Simon, what are your thoughts on moving to Switzerland?  Will that nation’s economy be drawn into the coming European depression?

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