Myanmar is among the hottest “frontier” investment markets today.

The country is going from an authoritarian regime to democracy, from a conflict situation to a situation of relative peace, and, most importantly, from a closed economy of state-owned companies, to an open, free market economy.

Such positive change all at once in one country is unprecedented.

Fund managers are falling over themselves to invest there. At The Myanmar Investment Summit in Hong Kong last week, I met some of them.

The problem is, at this early stage there is no easy way to invest. There is a stock market. But, it has only 2 listed companies: Myanmar Citizens Bank, and Forest Products Joint Venture Corp (FPJVC). But they don’t actively trade.

There are also two public companies controlled by Myanmar’s leading tycoon Serge Pun.

First Myanmar Investment Co., Ltd. trades “over the counter” in Myanmar among well-connected locals. But there is no stock market listing. The other is Yoma Strategic, the group’s Singapore-listed arm. But it’s already surged to a nosebleed valuation.

With so few investable vehicles, that leaves the private equity market. There are already plenty of people setting up such funds to capitalize on the wave of money sitting on the sidelines ready to wash into the Myanmar economy.

These funds will all need local businesses and projects to invest in. And that’s where the real opportunity lies.

For the right person, getting to work on the ground sourcing deals for all these “frontier investment funds” to invest in could be enormously lucrative. I’m talking about generational wealth potential.

Come up with a good idea, or find a great investment on the ground in Myanmar, and there is practically an unlimited amount of capital available for the project.

And there’s huge potential in the country. There’s a young population roughly 50 million people that’s simultaneously one of the cheapest work forces in Asia as well as one of the fastest growing consumer markets.

Manufacturing, tourism, agriculture, construction and building materials, real estate development, transportation, logistics… you name it, the country needs it ALL.

However, it’s not going to be a walk in the park. Myanmar still sorely lacks basic infrastructure.

Blackouts are commonplace. Just 25% of the population has access to electricity. There’s no functioning banking or financial system. Outstanding credit to GDP is just 5%. And, only 6% of the population has telephones.

So for now, it’s largely been a case of waiting for the infrastructure to improve… which is starting to happen.

Several independent power producers are getting ready to turn on the lights. The government will be announcing the winners of tenders for two new telecoms licenses in the near future. Credit cards are beginning to be accepted, and the banking system is being modernized.

And with the country’s profile on the international stage constantly improving, the time is ripe.

In what may go down as one of the most obtusely out-of-touch policy memos ever written, the United Nations Food and Agriculture Organization recently released a paper entitled “Edible Insects: Future Prospects for Food and Feed Security.”

http://www.fao.org/docrep/018/i3253e/i3253e.pdf

For 171 pages, the paper argues for insect-based diets, explaining why governments should “[d]evelop a clear and comprehensive legal framework” to ensure that we all start eating insects.

So what’s the UN’s reasoning behind this? How could the organization possibly justify such an idea?

Simple. Because it’s better for the environment.

As the paper states, “[i]nsects… emit considerably fewer greenhouse gases (GHGs) than most livestock,” and, “eating insects is not only good for [our] health, it is good for the planet.”

Sounds disgusting, no? But it’s all good, according to the report, because the Tukanoan jungle village (population 100) in Colombia eats invertebrate insects. Therefore, so should we.

They recognize that people might be put-off by such an idea. So their solution to resolve the ‘disgust factor’ is for governments to sponsor ‘bug banquets’ in order to reduce prejudice against insects.

It seems the fanaticism of these bureaucratic do-gooders has now reached epically farcical, and even dangerous levels; they view the government as an instrument to jam poorly-conceived solutions down people’s throats… in this case, almost literally.

This agenda ties in nicely with other government initiatives that tell people what they can / cannot put in their bodies: aspartame and high fructose corn syrup– good; raw milk– bad.

The paper also cites the cost factor. Without a full-frontal acknowledgement that food prices have been rising, the authors make a strong case for the economic benefits of insect-based nutrition.

Of course, anyone who has been to a grocery store in the last five years knows that food prices have been rising. A recent poll of Globe and Mail readers found that 53% of those surveyed have cut back on purchases because of rising food prices.

And when you look at the big picture for agriculture, it’s not pretty.

World population growth and the rising wealth demographics across Asia are driving unprecedented increases in demand.

Meanwhile, peak yields, soil erosion, weather challenges, water shortages, and declines in arable land worldwide are causing decreases in supply.

Then there are a number of destructive policy initiatives– price controls, export restrictions, etc. which lead to further supply reductions.

Plus the mother of bad policy, monetary policy, is creating trillions of new dollars in the financial system. Much of this finds its way into the agricultural commodity markets, driving food prices even higher.

Bottom line: rising demand, decreasing supply, and bad policy mean the best we can hope for is rising food prices. The worst case is potential shortages.

It’s a real problem. But with due respect to cultures that do eat insects, something tells me that global consumption Palm weevil larvae ain’t the solution.

I remember a few years ago when Bill Dudley, Goldman Sachs alumnus and current President of the New York Federal Reserve Bank, spoke at an event claiming that there was no inflation because the price of the iPad 2 was lower than the iPad 1.

At the time, this sounded like the modern day equivalent of “Let them eat cake,” the quip most commonly attributed to the wife of France’s Louis XVI months before their beheading in the 1790s.

The United Nations has clearly taken this to a whole new level. “Let them eat insects.”

It’s just another reminder of how truly out of touch these people are… and that placing any level of confidence in government to solve the world’s problems is dangerous course of action.

Early last week they passed S.743, the Marketplace Fairness Act. This bill requires US-based online merchants to charge, collect, report, and pay sales tax to the roughly 9,646 jurisdictions within the Land of the Free which levy such a tax.

And while grounded in well-intended socialist dogma as a means to ‘level the playing field’, all the bill will really do is stick consumers with a higher price tag on the products they currently purchase online.

Curiously, though, the Senate then introduced S.958 this week. This bill actually aims to DECREASE certain taxes that are currently charged… on beer.

Not to be outdone by such wisdom, though, the government of Spain announced a plan this week to seize homes that have been foreclosed on by banks and developers.

Politicians will then let Spanish families stay rent-free in those homes for up to three years.

It’s a bit of a reverse-Cyprus situation; instead of confiscating assets from bank customers, the government wants to confiscate assets from banks.

Again, well-intended. But this will likely destroy the mortgage market in Spain; who in their right mind would want to make home loans in that country anymore knowing that the foreclosure mechanism is unenforceable?

The plan should also do a great job scaring off foreign investors; remember, the Spanish government is desperate to reduce the excess housing inventory, and they recently announced a program offering residency to any foreigner who spends about $200,000 on Spanish property.

But instead of rolling out the red carpet for foreign investors, they’re now broadcasting a very loud message: “We do not respect private property rights.”

Again, just like the IRS targeting opposition political groups and illegally seizing the medical records of millions of Americans, or the Justice Department seizing phone records from the AP, this sort of Marxist land grab is something that you’d expect in Belarus or Venezuela.

So basically what governments in Europe and the Land of the Free are telling us is– Beer and Populism: good. Private property rights, freedom, privacy, business, price stability: bad.

These people clearly have their priorities straight.

Before signing off for the week, I wanted to give you a few more thoughts on Bangladesh.

Bottom line, there are definitely opportunities in this country. With such a huge population, cheap work force, and abundant resources, the potential is evident.

At the moment, though, most of the great investments in Bangladesh are private deals. This is the same case as Myanmar.

Public market investing in Bangladesh is fairly uninteresting. The stock market in Dhaka trades at about 17-times earnings with no dividend yield. Right now it’s down about 50% from it’s all-time high, but it still doesn’t strike me as cheap.

One lucrative opportunity is in private lending. So many locals have been shut out of the banking system because of bad policy and tight liquidity, but the need for capital is very strong.

For similar reasons, my colleagues in Mongolia set up a private lending business there, and they’re currently making 3% to 4% per MONTH lending to local businesses who cannot obtain loans through the Mongolian banking system.

Given the need for capital and the appetite for development that I’ve seen on the ground in Bangladesh, I suspect that figure can be exceeded here.

Agriculture is also interesting. Land leases are quite cheap. And the soil is incredibly fertile since the majority of the country is in an alluvial floodplain.

But the prevalence of natural disasters and government policy that inhibits large-scale farming operations really increases the risk level. On a risk-adjusted basis, it’s very hard to beat South America for agriculture returns.

Have a great weekend.

The Department of Homeland Security issued a seizure warrant to Dwolla, a US e-commerce company that provides online payments, for the money in Mt. Gox’s Dwolla account. The seizure of funds was triggered by an alleged failure of the company to comply with US financial regulations.

This is just another reminder of how governments operate when the going gets tough– they regulate, monitor, confiscate, restrict, and steal.

As I’ve been traveling across Asia recently, one recurring theme I’ve been seeing are these constant headlines that ‘inflation is under control.’

Across the region, and in fact across the world, the official statistics tell us that inflation is moderate, so it’s OK to continue printing more money.

Aside from being one of the biggest scams in modern finance, there are some serious flaws with this line of thinking–

First, central bankers almost universally focus on ‘preferred’ inflation metrics which typically ignore price increases for food and energy.

This may work fine and dandy in the developed world where people often spend less than 10% of their household income on food.

But in poor countries… where the other 90% of human beings live… people can easily spend upwards of 50% on food and fuel.

That central bankers willfully eliminate these important factors from their analysis effectively ignores 90% of the world’s population. It’s disturbingly out of touch.

Being on the ground in some of Asia’s poorest countries, it’s clear that inflation has not moderated… and that tens of millions of people’s lives have been turned upside down because the price of onions and turnips and chickens has gone through the roof.

This has very much been the case here in Bangladesh, where the surging prices of legumes, rice, and flour has hammered the 160+ million population.

Disingenuously, they say that “non-food inflation moderated to 7.12 in February from 7.79,” and use this as justification to keep printing. But the drop in iPad prices is no comfort to the guy who can’t afford to buy chickpeas for his family in Dhaka.

Meanwhile, many world stock markets are at their all-time highs– the US, Malaysia, Germany, Philippines, India, etc. Curiously, this stock market growth correlates perfectly with the amount of money printing that’s transpired (see chart).

See a pattern?

It’s not just stocks, either. Many of the world’s bond markets are also at, or near, their all-time highs. Even junk bond yields are hovering at 5%. It’s absurd. Not to mention other asset classes… such as US farmland, beef prices, etc.

Doesn’t it seem a bit strange that so many investments across the world can simultaneously be at their all-time highs? And are we really to believe (with a giant bull tearing through the cover of the Economist magazine) that this is a consequence-free environment?

Even US residential real estate is posting sensational price increases… much to the pleasure of mainstream financial media. One can almost hear the uncorking of the champagne bottles.

It’s important to point out amid all this euphoria, though, that nearly every known instance of hyperinflation started with a rise in asset prices. And in this case, frighteningly enough, we’re seeing a rise in almost ALL asset prices.

This was famously the case in post-Revolutionary France in the1790s. People actually cheered the idea of creating more fiat money because the values of their properties and assets kept rising.

Eventually, so did everything else. Between 1790 and 1795, the price of flour increased more than 100-fold, from 2 francs to 225 francs. Or a pair of shoes from 5 francs to 200.

And all the while, politicians pushed to print even more, threatening that if they didn’t, the country would plunge into deflation! Sounds familiar?

Bankrupt governments almost invariably resort to the same desperate tactics– like polluting the currency into hyperinflation, selling it to the people as ‘for their own good’, and criminalizing any alternative (like we just saw today with Bitcoin).

Some of the most dangerous words on earth are “this time is different.” It’s not. This time is never different.

The only English word my taxi driver knew was “shit”. And perhaps, given the state of his vehicle and road conditions, it was the most appropriate.

I lost count of the number of pedestrians we nearly mowed down on the way from the airport; it was difficult to see anyhow– the shattered glass from the bullet hole in his windshield obscured my view.

This was no typical third world taxi ride. Because… there are developing countries. And there are really poor countries. And then there’s Bangladesh– a country so destitute it makes sub-Saharan Africa look wealthy by comparison.

Bangladesh is so poor that the World Trade Organization has awarded it “Least Developed Country” status. It’s a dubious honor that’s supposed to impart 100% duty free, quota-free access to ‘rich’ countries like the United States.

But even despite such incentives, the manufacturing sector is running far below its potential; the nearly constant social unrest and political stunts tend to scare away foreign investors.

I saw this first hand as I spent the day exploring the city and meeting with locals– not a single westerner to be seen outside of my hotel lobby.

Spending time with bankers, brokers, and lawyers today, it’s clear one of the major reasons why the country is so poor is because there is an utter lack of access to capital.

Capital is the lifeblood of an economy… and of business. Without it, neither can function. But Bangladesh’s completely dysfunctional, government-dominated banking sector has nearly eliminated access to capital.

Politicians make the worst bankers– they wouldn’t know a good deal if it hit them in the head. Just in the last quarter, in fact, default rates at the state-owned banks soared 40%.

Meanwhile, small businesses and micro-enterprises are stuck without access to capital.

I saw the effects of this while walking through a market today– groups of metal workers were hammering away forging tools by hand, just like medieval blacksmiths.

They use technology from the Dark Ages because anything that’s remotely capital intensive just isn’t possible with the current financial system here.

This restrains productivity, production, growth, development… everything. And what you end up with is a GDP per capita that’s lower than even Myanmar’s– a country that has suffered from economic sanctions for more than a decade.

The bright spot in Bangladesh is that private industry is starting to fix this.

Private banks, for example, constitute the fastest growing portion of the financial sector. Their product offerings are superior, customer service better, and the banks are better managed and more highly capitalized.

You may also be aware that Bangladesh is the epicenter of microfinance; just down the road from me is the Grameen Bank headquarters, the microfinance bank founded by Muhammad Yunnis that revolutionized the industry.

These private-sector players are making a big dent in the government finance monopoly. And I expect that the flow of business credit will improve dramatically in the coming years.

Bigger picture, this is a huge market. Bangladesh crams 160 million people into an area smaller than the state of Iowa. It’s dirt cheap. There are trade incentives. There are natural resources. There’s a lot of turmoil and chaos at the moment. And best of all, it’s practically off the radar.

These are all great ingredients for an interesting long-term speculation. I’ll report back on what I find.

Some days one can’t help but look at the headlines and think of Ayn Rand.

With all the destructive measures by desperate governments from Cyprus to Argentina, it seems sometimes like we’re reading from the pages of her seminal work, Atlas Shrugged.

But what we’re seeing now seems to have far surpassed Atlas Shrugged. We’re definitely into 1984 territory.

We’ve recently learned that the US federal government has (a) secretly tapped the Associated Press’s phone records, and (b) used the nation’s tax authorities to target opposition political groups.

This is the same sort of thing one would expect from Belarus or Azerbaijan. But these sad events are, unfortunately, no longer surprising in the Land of the Free. Nor are they isolated.

One appalling example is the case of Richard Hatch, who I spoke to a few days ago. You may remember that Richard won the first season of the TV series Survivor back in 2000/2001… and the million dollar prize that went along with it.

Tax-wise, it was a complex matter; the production took place off the coast of Borneo, so the prize money was technically Malaysian-sourced income. Plus a number of other issues.

But Hatch and his tax team filed returns. They claimed the prize money. They paid tax on it. They event sought additional guidance from the IRS.

Never once did the IRS issue a ‘notice of deficiency’, essentially a routine letter they send when they think you owe them money.

And yet, Hatch was ultimately charged with a crime– ‘attempted’ tax evasion.

Now, it’s absurd that tax evasion is even a criminal matter in the Land of the Free. It’s even more absurd that ‘attempted’ tax evasion is a crime.

But it defies all reality that an individual, who was fully up to date on his filings and being advised by licensed tax professionals, was personally tried and convicted of such a ridiculous charge, having never once been notified by the government that he owed a single penny.

After this shocking conversation with Richard, I spoke to William Binney, a 35-year veteran of the NSA. During our call, Binney walked me through some very technical details about the government’s illegal monitoring and archiving of ALL Internet traffic, and HOW they’re doing it.

William Binney is a man of tremendous integrity; he resigned from the NSA to protest the wanton dismantling of the Bill of Rights.

Since then, government thugs have kicked down his door at gunpoint. He’s been maliciously sued by Uncle Sam. He’s had his private property seized. All because he continues to expose the crimes that they’re committing.

And these are crimes, plain and simple… clear violations of the Fourth and Fifth amendment.

Bottom line, EVERYONE is being monitored. Every email is being archived. And the data is being shared across the government spectrum with law enforcement as well. This is important.

Today, there are thousands of crimes on the books in the Land of the Free. If they want to, they can get you for anything, even ‘attempted tax evasion’. You can’t even apply for a passport without being threatened with jail time.

And with such ubiquitous surveillance, they can get any information they need to seize property or incriminate anyone they want on whatever stupid law they can dig up.

The easy course of action is to live in denial– “It can’t happen here, it won’t happen to me.” Everyone wants to think this. But it does happen. And given the trend, it’s going to happen much more.

This isn’t intended to be gloomy, rather a sobering wakeup call. Sometimes the hardest thing to do is step back, look at the big picture, and realize that these tactics are no longer fiction. This is now reality in the Land of the Free. Welcome to 1984.

Each time I’m in Singapore, I’m continually impressed at the country’s extraordinary growth.

Friends of mine tell me about their experiences growing up here in the 1940s and 1950s. The downtown area that is now covered with soaring towers of steel and glass were once repugnant cesspools devoid of running water or proper sewage.

Every day, locals would take buckets of human waste from their shacks and dump them into the nearby bay.

Nobody probably imagined that, within a few decades, Singapore would be the premier financial destination in the world… as well as one of the wealthiest.

Today there are more millionaires per capita in Singapore than anywhere else; one in six Singaporeans has a net worth in excess of one million. And for the average Joe, median household income ranks among the top worldwide.

Not to mention, standard of living in Singapore is very high– schools, medical care, goods and services– all among the best on the planet.

Even more incredibly, they built this without a single drop of oil reserves. Singapore isn’t Kuwait. It’s a small island with effectively no natural resources to speak of.

While much of the developed world languishes under the massive burden of staggering debt and painful unemployment, Singapore has ZERO net det. And the unemployment rate is below 2%.

This isn’t some phony made-up number either. My friends who own businesses here tell me that there are labor shortages… they just can’t find any new people to hire.

So how did this all happen? One key principle– economic freedom.

In Singapore, business is treated incredibly well. Bureaucratic, regulatory nonsense is kept to a minimum. Corruption is nonexistent. It’s easy to set up a business and start competing. Plus taxes are ultra-low and highly competitive.

Right now a small business that makes a $100,000 USD annual profit pays an effective tax rate of just 1.2%. A $1 million annual profit would have an effective tax rate of less than 12%.

Bigger businesses can negotiate directly with the government for preferred tax rates, often 10% or less.

Capital is also treated incredibly well. The banks are well capitalized, the currency has long been one of the best performing in the world, and Singapore has become a major crossroads of cross-border trade and investment opportunity.

Last, Singapore treats productive, talented people incredibly well, including foreigners. It’s possible to obtain residency by starting a business here or getting hired. And, like corporate, personal tax rates are low.

Income tax on a $250,000 (USD) salary has an effective rate of just 12.4%. And there are no capital gains or dividend taxes.

Despite having such low tax rates, the government is awash with cash and runs a huge budget surplus. They’ve also managed to sock away a tremendous amount of money in sovereign wealth funds.

The lesson is clear. Bankrupt western government are trying to increase control over their respective economies– regulating, inflating, and taxing their way to a bigger slice of a rapidly shrinking economic pie.

Singapore, on the other hand, has focused on helping make the pie bigger. And it’s amazing how rapidly it can grow when governments step out of the way and allow people to keep what they earn.

If I told you that the insurance fund which backed your bank deposit only had enough cash to bail out 0.35% of the banking system, would that make you feel any better?

Probably not. But this scam is the reality in the US banking system… and across the West.

As an example, US Bancorp has $248 billion in total customer deposits according to their most recent reporting, yet a mere $6.9 billion in cash… roughly 2.8%.

PNC Bank holds just 1.8% of its customers’ $248 billion deposits in cash. And BB&T holds barely 1.0% of its customers’ $131 billion deposits in cash.

These figures are indicative of the entire western financial system. Banks hold a very small percentage of customer deposits in cash. The rest is sitting in loans, bonds, and other securities of indeterminable value– mortgages that are still under water, shaky commercial real estate deals, etc.

Truth is, nobody really knows what’s on their books. Loan portfolios are like a black box, and the liquidity structure doesn’t leave a lot of room for error.

Think about it. If the slightest thing goes wrong– a spike in customer withdrawals, a decline in bond prices or commercial real estate, etc.– banks simply don’t have any rainy day funds set aside to handle it.

And who can blame them…? The FDIC, one of the US banking system’s chief regulators, has a mere $33.0 billion reserve fund to insure $9.3 TRILLION worth of deposits in US banks… a ratio of just 0.35%. And the FDIC is backed by the insolvent US government!

Bottom line, we simply can no longer afford to blithely assume that our bank… our most intimate financial partner… is in good financial condition.

The good news is that in 2013, it’s no longer necessary to save within the confines of our home country; it’s possible to establish a bank account in a country where the banks are actually well capitalized and liquid.

Singapore is one of those places. In fact, Singapore has ZERO net debt and has never had a banking failure in its history. Plus the banks are swimming in cash.

UOB Bank, for example, has 33.7% of its customer deposits in cash equivalents. OCBC holds 35.8%. These banks are literally 10 to 30 times more liquid than their western counterparts.

With a bit of legwork, it’s possible for both individuals and businesses to open insured accounts at either of these banks.

Today I even managed to convince one of my bankers here to open business accounts for US LLC’s… which means that anyone with a global self-directed IRA can hold retirement savings at a well-capitalized Singaporean bank. More on this soon.

The advantages of banking here are obvious; pitting the US against Singapore, there’s simply no comparison.

If everything goes fine and there are no major hiccups in the world, you won’t be worse off for holding some savings at a highly capitalized bank in Asia’s most dominant financial center.

Yet if there’s another major meltdown like we saw in 2008, or worse… these insolvent Western governments pull a Cyprus… then having funds in Singapore may turn out to be one of the sharpest financial decisions you could have made.

Reporting from Singapore

The worldwide movement to tax, confiscate, and regulate everything imaginable turned a new page earlier this week when the “Marketplace Fairness Act” passed in the US Senate.

The bill still needs to clear the House of Representatives. But its fundamental purpose, enforcing state sales tax for online transactions, is almost guaranteed.

Even if they don’t manage to successfully push the bill through this time, they’ll just re-propose a new version of it in a few months’ time until it finally passes and destroys the digital economy.

First, there’s the obvious consequence of the end-user consumers having to give governments more of their hard earned savings to pay for bombs, drones, and body scanners.

Additionally, though, the law would bury -any- business that has an online presence with an enormity of paperwork and tax filings.

Consider the prospect for a budding entrepreneur in the Land of the Free– start a business and go blind on tax reporting to dozens of states, then pay through the nose for Obamacare. Sounds like a great deal, right?

They might as well send greeting cards to productive citizens saying “Please leave the country, thank you.” And they should. Because this is a perfect example of how diversifying internationally can work for you.

Fact is, this law would not apply to foreign companies who do business online and sell to US-based consumers.

Simply as a matter of practicality, it’s not possible to get every business in every jurisdiction in the world to marshall the appropriate resources behind complying with such an absurd requirement. How do you get an e-tailor in India or Bhutan to track, report, and pay sales tax on a customer in Kansas?

More importantly, though, there is a vast network of international treaties– Double Taxation Agreements, Free Trade Agreements, etc.– protecting foreign companies from such tax.

As an example, the US-Singapore Free Trade agreement has an entire section devoted exclusively to e-commerce. So even from a legal standpoint, a US-based tax would not apply.

The solution is clear. Folks who are primarily doing business online, or thinking about doing business online, ought to seriously consider getting professional advice to move the business overseas.

Here in Singapore, you can register a new business, inclusive of secretarial and resident director services, for about $3,000 USD.

It’s well worth it. The banking system here is modern and well-capitalized. And the support services for an online business ranging from web hosting to credit card processing are excellent.

Moreover, Singapore’s tax system is one of the most competitive in the world. Right now, for example, a $100,000 net income in 2013 would end up with an effective corporate tax rate of just 1.2%. A $1 million net income would result in an 11.88% effective tax rate.

If that’s too expensive, the Marshall Islands has a zero percent tax rate and lower corporate registration costs (<< $1,000 total). Yet it’s still possible to access Singapore’s excellent digital and financial infrastructure with a Marshall Islands company.

Online companies are by far one of the best ways to take advantage of international diversification. You can set the company up in one place, bank in another, process credit card transactions in another, host your web site in another, outsource employees to another, etc… all in the specific jurisdictions which make the MOST sense for your business.

It’s completely 100% legitimate. And in doing so, you might just dodge a bureaucratic land mine.

I’m not much of a fiction reader, but about two years ago a friend turned me on to a couple of books by Daniel Suarez– Daemon, and its sequel Freedom.

I won’t ruin the plot, but it’s an excellent story with gripping insights into what the future could look like after a crash of the global financial system.

When in Vietnam, I’m constantly reminded of a quote in which one of the main characters says:

“Anyone who has ever tried to share pizza with roommates knows that Communism cannot ever work. If Lenin and Marx had just shared an apartment, perhaps a hundred million lives might have been spared and put to productive use making sneakers and office furniture.”

He’s right. It seems so obvious… Communism cannot work.

This country is one of the few remaining places in the world that still officially considers itself a Communist state.

After defeating the French in the 1950s and ultimately winning the “American War” as they call it here in the mid-1970s, Communism was in full swing. The country was a veritable paradise for state-loving Marxists.

And yet, within a decade, Vietnam was easily one of the poorest countries in the world despite having dazzling potential.

First of all, it’s gorgeous. If you’ve never been, Vietnam has one of the most beautiful coastlines on the planet, and that’s really saying something.

This city, Hanoi, is really an Asian version of Paris; it’s sophisticated, romantic, highly cultured, and culinary… yet absurdly cheap.

(As an aside, if you’re an art lover, you’ll be shocked at the quality and value of local artwork here. I bought a number of pieces that I’m excited about.)

The country’s population of 90 million is a huge consumer market. And the labor force is educated, ambitious, hard working, and inexpensive. It’s a manufacturer’s dream.

Vietnam is also abundant in natural resources– from fish and agriculture to offshore oil and gas.

It all seems like a no-brainer growth story. But years of Communism ran this place into the ground. As author David Lamb writes, “Vietnam was like a racehourse whose jockey kept yanking on the reins rather than giving the animal its head to find full stride.”

By 1986, over a decade after the reunification of north and south, Vietnam was as poor as it had ever been. So the government embarked on a new policy called Doi Moi, a Vietnamese version of Perestroika.

People were given the right to ‘enrich themselves’, and privatization (though they didn’t call it that) became commonplace. The results were obvious.

Inflation fell from 700%+ to single digits. Vietnam went from being a net importer of rice to one of the largest exporters. It also became an export powerhouse with other agricultural products like cashew nuts, coffee, and more.

Most importantly, standard of living improved dramatically for tens of millions of people.

But now the government has gone and screwed it up all over again.

At the onset of the global financial crisis in 2008, the Vietnamese government began following the lead of the United States and Europe in spending its way out of recession.

Yet as the unfortunately named Dong is not an international reserve currency, Vietnam instead simply suffered a new crisis brought on by rising budget deficits, higher debt, and steep inflation.

When it became clear that such tactics don’t work, the government increased its desperation and devalued the Dong. Three times. In less than eighteen months.

Inflation soared and the government imposed wage and price controls trying to control inflation.

Locals abandoned the currency, and gold was in huge demand– until the government stepped in with new decrees which ‘highly discouraged’ gold ownership. (If only people had stored their gold outside the country…)

All of this is a classic, textbook response. When governments are in trouble, they try to control everything. But these measures never work… they only make things worse. And today, the economy is in pretty bad shape.

Vietnam’s property market is in shambles. Unemployment is stubbornly high. GDP is sluggish at best. Inflation is still a big problem. And the government was caught, rather embarrassingly, fudging its official statistics.

There are few places in the world I can think of which have more bottled up potential. And it’s all being squandered by a tiny elite. This is, perhaps, the story of things to come in the West.

It took me two attempts. But, today I opened an account at the Bank of China.

The reason? They’ll no longer buy gold bullion from you unless you bank with them.

I wasn’t selling personally. But, an overseas friend is having a temporary liquidity crisis, and asked me to liquidate a couple of ounces from his stash.

I went to the Bank of China and Hang Seng Bank to see where I’d get the better deal for his Maple Leaf coins.

It was no contest. Hang Seng quoted me the Hong Kong dollar equivalent of spot gold. But, the Bank of China quoted me 4.5% ABOVE the spot price of gold.

Needless to say, the choice was obvious. As was the opportunity.

Given the price differences, I realized instantly I could buy Maple Leaf coins at Hang Seng at the spot price of gold plus their HK$50 mark-up, and then sell them for almost 4.5% more at Bank of China.

Talk about a perpetual money machine.

But as it turns out, Hang Seng doesn’t actually have any Maple Leafs to sell right now! So, no dice today. I’ll check back soon.

Even without the easy arbitrage, though, I went ahead and opened the Bank of China account to get my friend the best deal.

And let me tell you, it wasn’t easy… even though I’m a Hong Kong resident.

At the first branch I tried, they wanted not only a copy of a current utility bill from my Hong Kong residence, but also a proof of address from my “permanent home.” In their limited worldview, this means an address in the country that issues my passport.

I told them I’ve not lived in that country for over 17 years, certainly don’t have an address there, that Hong Kong is my permanent home, and why was that not good enough?

They refused to budge. So, I walked out.

Fortunately my second attempt at a different branch, worked out better. They were satisfied with my explanation.

The lessons here are four-fold:

1. Physical gold is hard to buy right now in Hong Kong. Hang Seng had only Australian Kangaroo nuggets in stock, and no Maple Leafs.

2. Selling your gold at a fair price if you have an emergency is getting tougher too. The paperwork and rules and regulations are becoming stricter, even in a freewheeling place like Hong Kong.

I cannot be sure, but I suspect The Bank of China’s new requirements are part of the whole anti-money laundering regime.

If you have an account with them, they’ve already had a chance to rake over all your private details, and hopefully satisfied themselves that you’re not a criminal terrorist mastermind.

3. Opening bank accounts in Hong Kong is becoming more and more difficult, too. It would not surprise me if there comes a time when even the likes of HSBC start refusing non Hong Kong residents.

But, for now:

4. If you don’t succeed at one particular branch, persevere. Results tend to vary depending on whom you are dealing with.

Of course, if you deal through the right channels, it’s still very simple.

Singapore has similar bank policies as Hong Kong. But attendees who came to our Offshore Tactics Workshop in Santiago, for example, were able to walk away with a Singapore bank account without even having to go to Singapore.

It’s a perfect illustration of the power of relationships, and especially Simon’s strong network of contacts around the world.

The world is truly an enormous place… and, despite the dearth of good news and positive trends out there, I still see a lot of amazing opportunities in my travels.

But it’s really important to remain grounded about the challenges that face us. As I pen this letter to you, in fact,

- The NSA’s Utah data center, which will intercept every phone call, email, and tweet sent across the Internet, is nearing completion.

- The Marketplace Fairness Act, which will create additional sales taxes on US-based Internet transactions, is set to pass the Senate next week.

- The government of Cyprus just passed the final bail-in measures, officially authorizing the direct confiscation of people’s savings in that country’s banking system.

- The Bank of Japan recently announced its intentions to double down on their already unprecedented money printing operations.

- Not to be outdone, the US Federal Reserve just announced that they will maintain their Quantitative Easing program, which dilutes the existing money supply by more than $1 trillion annually.

- At $16.83 trillion, the US federal debt is at a record high and set to breach $17 trillion early this summer.

- President Obama recently proposed to cap the tax deferral benefit on Individual Retirement Accounts in the Land of the Free

These are clear warnings signs that a rational person simply cannot ignore.

Bottom line, nations are going bust. And the worse things get, the more desperate their tactics become.

This isn’t the first time that the world has been in this position. This time is not different.

History shows that there are serious, serious consequences to running unsustainably high debts and deficits. And those consequences have almost invariably involved pillaging people’s wealth, savings, livelihoods and liberties… either directly or indirectly.

What’s happening right now is playing out in textbook fashion. More taxes, more debt, more printing, more confiscation, less freedom.

And in case it still weren’t obvious, I’d like to present Ron Paul and Jim Rogers, speaking together at our event in Chile a few weeks ago, with their own views on the situation.

I really hate to be negative… but this is positively revolting. Disgusting. Indescribably offensive.

In the Land of the Free recently, a California couple had their child kidnapped by the state. At gunpoint.

It all started in mid-April when Anna and Alex Nikolayev took their 5-month old son Sammy to the hospital in Sacramento to be treated for flu symptoms.

The parents didn’t particularly care for the treatment that their son was receiving. Doctors were pumping him full of antibiotics and soon began talking about performing surgery.

Anna and Alex argued with the doctors and said that they were going to get a second opinion; they took the baby and went to another hospital where another physician deemed it perfectly safe for the child to return home with his parents without the need for surgery.

The next day, with the family resting comfortably at home, the police showed up with Child Protective Services.

Alex, the father, went outside to talk to them where he was thrown to the ground by police. Officers then relieved him of his house keys and proceeded to let themselves into the house with hands on their pistols.

Then, still with their hands on their pistols, they told the mother “I’m going to grab your baby, and don’t resist and don’t fight me…”

The child was then ripped from his mother’s arms and placed into state custody, where he remained for a week.

Yesterday, a Sacramento County judge ordered that Sammy be transferred to a hospital in Palo Alto (120 miles away), and that his parents finally be given unfettered access to their son… under the condition that the State of California’s Child Protective Services continue to monitor the ‘situation’.

Guns. Cops. Government bureaucrats. Courts. Kidnapping. A dysfunctional medical care system.

This is what it means to be in the Land of the Free… where collecting rainwater, consuming raw milk, or seeking a second opinion on your child’s medical care is now criminalized.

When you don’t even have the basic right to make decisions about your own child… and when your own child can be forced from you at gunpoint in your own home that was entered illegally… you know that freedom has officially hit the waste bin of history.

Perhaps the greatest irony is that the parents are originally from Russia… but they had to come to the United States to find the Soviet Union.

Have you hit your breaking point yet? If not now, when?

ABN Amro, the Dutch state-owned banking giant, recently revised its global macro and gold outlook, forecasting a $1,300 gold price by the end of this year.

Moreover, the bank forecasts $1,000 gold by December 2014, and $800 gold in 2015. Why?

“The authorities — especially in Europe — have acted to reduce systemic risks and inflation is going down rather than up. . . Other assets will become increasingly more attractive as the growth outlook improves.”

Wait, hang on; they lost me with the ‘all is well in Europe’ argument.

Across the continent, the dominos are falling far faster than Angela Merkel, the ECB, and even the IMF can stand them back up again.

Slovenia is now in need of a banking sector bailout. Even according to the OECD’s latest economic survey of the country, “Slovenia is facing a severe banking crisis”.

This, amid continually rising debts and record high unemployment in the region.

To put this in context, the number of unemployed in Spain now exceeds the entire population of Madrid… representing about 13% of the entire Spanish population and 27% of the nation’s workforce.

ABN Amro’s reports go on–

“Systemic risks to the financial system and the global economy have declined notably, despite the bailout of Cyprus.”

Er, “despite the bailout of Cyprus…” You mean the one involving outright confiscation of people’s money? The one where the Russians wagged their fingers at the EU for acting like the Soviet Union?

Sure, despite the bailout of Cyprus, everything’s dandy. And other than that, Mrs. Lincoln, how did you enjoy the show?

ABN continues: “Another blow [to the gold price] will come when the Fed’s first rate hike (that we expect in early 2015) comes into view.”

Now, bear in mind that US debt already exceeds 100% of GDP.

Even using the US government’s own ridiculous budget projections (which assume 3.5% REAL GDP growth) Uncle Sam will still accumulate over $5 trillion in debt over the next decade.

But here’s the thing– the current $16.75 trillion of US debt has an average maturity of just 65 months. This means that the US government will be on the hook to repay a huge chunk of its debt within the next 5 1/2 years.

So in addition to issuing $5 trillion (optimistically) in new debt, they’ll also have to re-issue trillions more in existing debt.

Someone is going to have to mop up all that debt. The question is… who?

The Chinese are actually REDUCING their Treasury exposure as a percentage of total US debt (see chart). This is consistent with their objective to strengthen the renminbi.

The story is the same with Japan at the moment, whose nominal US debt holdings have actually been decreasing.

The US Social Security trust fund is also a major holder of US debt. Yet, according to the Washington Post, roughly 10,000 people EACH DAY become eligible to receive Social Security pension benefits.

Given the increased outflows and high level of US unemployment (fewer people paying into the system), it’s doubtful that the Social Security trust fund will have sufficient cash to bail out the Federal government.

This leaves the US Federal Reserve as the lone player to mop up all this debt. There simply are no other options; the US government will default in all likelihood, unless the Fed continues debauching the currency to buy Treasuries.

This will drive even more money into real assets, pushing prices higher… especially gold.

Jim Rickards, fund manager and author of the acclaimed book Currency Wars, spoke at length about gold and the future of the global financial system at our Offshore Tactics Workshop in Chile earlier this month.

Needless to say, his forecast for gold is… slightly different than ABN Amro’s.

Later this afternoon I’ll send you a short video clip of his remarks so you can see this analysis for yourself. It’s some of the best insight on gold I’ve ever seen.

The flight from Penang to Koh Samui is quick. And it’s incredibly cheap.

Unlike their Western counterparts, Asian discount air carriers actually walk the walk. You can zip around the region for flights often costing just $50 to 100.

And it’s well worth it, there is much to see in Asia… from the obvious opportunities in Cambodia to the clear lifestyle advantages in Malaysia to here in Samui, which has some really spectacular beaches and a great international crowd.

Like the flights, it’s cheap here. A spectacular ocean-front villa here with a private swimming pool is setting me back about $150… which barely registers a second-rate motel anymore in the West.

And for budget travelers, backpacker beach hostels go for just a few dollars a night.

I’m emphasizing pricing here because I’m trying to make a point about travel– it need not be expensive.

Many major airline alliances like One World and the Star Alliance, for example, offer special ’round the world’ fares, taking you across five or six continents over the span of several months, for just a couple of thousand dollars if you don’t mind coach.

This is quite valuable… especially considering that travel is a far better teacher than a conventional education. The experiences and knowledge one gains on the ground around the world cannot be taught in any classroom.

This is one of the things that we always encourage at our summer entrepreneurship camps: For young people, the world is devoid of the opportunities of the past. And, to get ahead, they’ve got to think differently– build real skills, accumulate unique experiences, and seek opportunities in overlooked places.

(You can find out more about our free summer entrepreneurship camp, and how to apply, by visiting www.BlacksmithCamp.com.)

Before signing off for the week and getting some much needed R&R, I wanted to address a question we received several times this week.

One of our readers, Robin T, summed it up by asking– “Simon, I see you’re in Cambodia; I’ve read on the Internet that there is an economic citizenship program available there. Is this real, or a scam?”

Sure. It’s simple. There is no ‘economic citizenship’ program in Cambodia.

In certain countries like St. Kitts or Dominica, you can make an investment in the country and potentially receive a passport in return.

There’s also a new program in Europe (just outside of the EU) that few people know about. Only Sovereign Man has presented this option publicly, and we even flew out the country’s retired Minister of Foreign Investment to address attendees at our workshop in Chile a few weeks ago.

So these programs do exist. But not in Cambodia.

The Cambodian government grants certain investment incentives through its development council; upon making a $300,000+ investment, foreigners potentially qualify for a reduction in the residency period that’s required to become a naturalized citizen.

But as an official at the development council told me, there are still a multitude of requirements to obtain citizenship… like, oh, language proficiency. Anyone going to learn Cambodian anytime soon?

Yet a bunch of clowns on the Internet present Cambodia as if you just pay some money and they hand you a passport. And this is just not true.

Look, international diversification IS a great solution… a time-tested way to reduce your exposure to a bankrupt, corrupt government. But it has to be done the right way.

And there are more productive options for your hard earned savings than trying to buy some silly travel document issued by a corrupt bureaucrat in a third world country.

At a minimum, it puts you at significant risk. Even if the deal works out and you end up with a passport, imagine the scrutiny you’ll get if you ever try to use it… especially if you look like a Westerner.

Instead, with some time and effort, it’s possible to become Belgian, Brazilian, Singaporean, etc. And to do so legitimately, in the light of day.

There’s no shortcut to doing things the right way. But unfortunately, there’s also no shortage of digital snake oil salesmen who rake in huge fees by exploiting people’s fear and ignorance.

My best advice with respect to any such program you may be curious about– always ask to see the law, and to speak directly with the officials in charge of the ‘program’.

Have a great weekend.

Though few people have heard of Penang today, it once ranked among the most opulent destinations in the world.

Ceded to the British East India Company in 1786, Penang was a critical trading hub for European imperialists; it thrived as a free port along critical eastern trade routes and rivaled even Singapore’s importance.

By the early 20th century, cosmopolitan Penang was famed as a must-visit for the international elite– from silent film stars such as Charlie Chaplin and Douglas Fairbanks to celebrated authors like Rudyard Kipling and Joseph Conrad.

Fast forward 100 years and Penang’s reputation for glamour and intrigue has been supplanted by Hong Kong and Dubai. But it’s still an amazing place.

First of all, it’s incredibly civilized. Most folks come to this little Malaysian island expecting rural Cambodia. Instead they get coastal Portugal.

The infrastructure, from roads to digital communication, is first rate. It’s clean… and in many cases, polished and sophisticated.

It’s also multicultural. Penang’s history has made the island a pan-Asian melting pot, plus a very healthy mix of Westerners– Portuguese, British, and even Dutch.

Nowhere is this more obvious than in local cuisine, among the finest in Asia. Restaurants are fantastic, serving some of the most eclectic fusion dishes imaginable.

One of the best parts about Penang, and Malaysia in general, though, is the price. It’s shockingly cheap to live here without having to sacrifice quality… all wrapped up in an entrepreneurial economy that still thrives on its freewheeling tradition.

Today, Penang functions as an export processing zone whereby entrepreneurs import raw materials duty free, add value, and export. Rather than manufacture socks and underwear like much of Asia, though, Penang’s highly skilled workforce produces microchips. And everywhere you look, it seems, are help wanted signs.

Another nice thing is that there are several ways to obtain residency here, including purchasing a home or demonstrating basic financial solvency (less than $200,000 in cash and roughly $3,300 per month in offshore income). See Malaysia’s My Second Home program (www.mm2h.gov.my) for details.

Let’s be honest; if history is any indicator, there may come a time when getting out of dodge is the only choice left.

Throughout history, there have been periods of intense chaos and turmoil. And in each instance, there were always people who were ahead of the trend– from Bourbon landowners who left before Robespierre’s Reign of Terror, to Jews under Nazi Germany.

Again, this isn’t a doomsday prediction. Far from it. But given the potential for epic financial failure in the world, it certainly behooves a rational, thinking person to consider options overseas.

And, as history shows, sometimes this even means a foreign residence.

Trust me on this– if it ever comes down to you having to hit the eject button, you won’t want to start the planning process while you’re packing your bags.

Knowing where you would go should the need ever arise, and even having residency lined up, is a good idea… no matter what happens. You won’t be worse off for it.

And if you’re going to start that planning, Penang is definitely a destination you may want to consider.

When you’ve got a guy like Senator John McCain who says “The battlefield is the United States of America,” it tells you that almost nothing is safe in the Land of the Free.

Whatever remains of civil liberties is going to feel the full brunt of the state’s boot heel.

They’re already regulating some of the most fundamental aspects of life, from how we are allowed to educate our children to what we can / cannot put in our bodies to the very nature of money.

People are forced to hold their savings in insolvent banks backed by insolvent insurance funds backed by insolvent governments. And those insolvent governments have demonstrated that they are perfectly willing to directly confiscate accounts.

Retirement funds have proven to be an easy, tempting target. A number of countries including Argentina, Ireland, and Hungary have appropriated private pensions. Even the US government temporarily dipped into federal employee pensions.

Western governments are making every possible effort to take over the Internet. Despite every previous attempt (SOPA, PIPA, etc.) failing due to public outcry, they keep trying and trying (ACTA, CISPA, etc.).

They’re raising taxes, creating new ones (including Maryland’s new ‘rain tax’), imposing capital controls, racking up debt, and rapidly devaluing their currencies.

It all reeks of desperation… and it’s all so obvious. At least, for anyone paying attention.

Unfortunately it’s easy to lose sight of the truth. After all, how can there be any economic problems when the stock market is at an ‘all-time high’ and Nobel Prize winning pseudo-scientists tell us that debt levels don’t matter?

Truth is, these enormous challenges shouldn’t be ignored. The entire global financial system is sitting on a bed of dynamite. Central bankers are dousing the pile with gasoline while politicians are standing around smoking.

The potential for epic disaster cannot be understated.

This is not to say that the world is coming to an end. Far from it. History is quite generous with past example of once-great civilizations that collapsed under the weight of their own hubristic debt.

Things didn’t end. They changed. Simple. And that’s what’s happening now in a textbook fashion.

Governments in trouble almost ALWAYS resort to the same destructive tactics. When things are clearly on the decline, rather than INCREASING freedom and opportunity, they try to control EVERYTHING.

We’re already seeing the early stages of this with competitive devaluation, basic capital controls, and bank withdrawal limits.

These will soon give way to wider capital controls, increased border controls, wage and price controls, asset confiscation, and more.

It only delays the inevitable. The more they control, the more rapid the deterioration becomes. Again, this isn’t some sensationalist prediction; it is the very common historical trend.

The other thing that history shows us, however, is that there are always a handful of people who see the writing on the wall and take action. And that action has almost universally involved looking abroad and diversifying internationally.

This is a time-tested strategy that was once available only to the wealthy landed class. But with modern air transport, digital communication, and global competition, solutions are now available to just about anyone.

I’ll be honest with you– moving one’s assets, business, and even family overseas isn’t easy. These are complicated topics with numerous tax, financial, and professional implications. So go carefully and rationally.

But when structured properly, history shows that a well-informed offshore strategy can have a generational impact should chaos ensue.

And, should nothing ever go wrong in the world, you won’t be worse off for it.

Surprise, surprise… the completely insolvent US government has yet another idea to raise revenue in the Land of the Free: a new tax!

The Marketplace Fairness Act was introduced some time ago, and we’ve discussed it before. But it’s now being rushed through Congress as quickly as possible.

It’s aim? To collect sales tax for online transactions. And in addition to being financially debilitating, the bill is also a bureaucratic nightmare.

Just imagine– if passed, online retailers will have to collect a different tax for every customer based on his/her location, keep track of it all, pay the correct amount to dozens of state governments, AND file periodic reports to each of them.

It borders on the absurd. Naturally, though, the Obama administration “strongly supports” the bill because it will “level the playing field” for mom and pop shops on Main Street.

Total nonsense. This is just another money grab masquerading as good intentions for the benefit of the people.

What they haven’t managed to figure out in all this time is that raising or creating taxes doesn’t actually increase tax revenue.

In the post-war history of the United States, taxes and tax rates have been all over the board.

And yet, as a percentage of GDP, the US government consistently takes in about 17.7% of GDP in tax revenue, i.e. their ‘slice of the pie’ remains the same.

But while raising or creating taxes doesn’t actually increase total tax revenue, they can affect GDP– ‘the size of the pie.’

When taxes are high, people have a disincentive to spend, invest, or start businesses.

In this case, the bill sticks it to consumers and Internet retailers. Businesses will go under, and individuals will reduce their consumption due to higher prices.

Net result: a decline in economic activity. For the government, this means taking the same 17.7% slice of a smaller pie. It’s genius!

You’d think the government was intentionally trying to push productive people out of the US.

Think about it– the banks are insolvent, the stock market is rigged, nearly every aspect of people’s existence is criminalized and overseen… from what we can put in our bodies to whether we can collect rainwater.

And anyone wanting to start a business has a myriad of taxes and regulations to navigate, such as Obamacare or this new Internet sales tax. Why bother?

There are places in the world, like right here in Cambodia, that are teeming with opportunity, minimal regulation, and almost no competition.

This will be the other major effect of this legislation (and all the other tactics that the government is embarking upon in the Land of the Free)– people will simply leave, either physically or virtually.

From this bill, any rational Internet entrepreneur will merely restructure the company overseas where the law cannot be applied.

This is the ‘multiple flags’ approach that we have been discussing for years in this letter, and detailing exclusively in our premium service Sovereign Man: Confidential.

With a few carefully managed steps– incorporating the business in one location, processing payments from another, warehousing in another, managing from another, it’s possible (and completely legal) for online companies to escape this burden.

And I suspect a great many will do so. At least, while the window to take action is still open.

In the killing fields outside of Phnom Penh, you can still see bone fragments protruding from the ground. It’s harrowing to say the least.

Roughly two million people were wantonly massacred in the 1970s under the rule of Pol Pot, decimating not only the population but also the nation’s economy.

Modeling his policies on communist China’s failed “Great Leap Forward”, Pol Pot destroyed libraries and machinery, devastating the means of production for decades to come.

Naturally, there were a few people in Cambodia who saw the writing on the wall in the early 1970s. They didn’t wait around, and instead took what they could carry and got the hell out of dodge.

They rebuilt new lives for themselves in places like Australia, Singapore, and France at a time when Cambodia was going through the worst turmoil in its modern history.

Today is a different story. Cambodia is once again thriving– producing, exporting resources, and welcoming foreign investment. The economy has consistently (and realistically) been growing at 7%+ for years.

I’ve met several Cambodians living here now who come from some of the families that escaped forty years ago. When the turmoil ended, they returned.

They brought the savings that they accumulated overseas… along with experience and skills… and started thriving businesses here that contribute to, and benefit from, the booming local economy.

Their stories are fascinating. Even inspiring. They’re real life examples of how our primary responsibility is to do what is in the best interest of our families, wherever that takes us in the world.

As I was flying up here over the weekend, I happened upon an interesting article in the Wall Street Journal entitled “Protecting Your Portfolio From Calamity”.

This raised my antenna a bit as most mainstream media sources tow the line that everything is hunky-dory.

The author rightly observed that “[t]he bombings in Boston and an outbreak of bird flu in China are just the latest reminders that everyone needs a disaster plan,” and that it makes sense to “rationally plan for the worst.”

I was shocked to see something like this out of the Journal, especially when she went on to recommend the same things we talk about routinely in this letter– opening bank accounts in places like Hong Kong and Singapore, or having foreign residency.

But one huge point was missed in the article: It wasn’t so much the bombing in Boston that serves as a reminder to have a ‘disaster plan’, but rather the response.

Everyone in the Land of the Free ought to be keenly aware of just how fast one of the country’s biggest cities was reduced to a ghost town… or how fast thousands of gun-toting, combat-clad paramilitaries descended upon the region with urban assault vehicles and ‘shelter in place’ orders.

No doubt, governments tend to screw up just about everything they try– from the economy to education to disaster relief. But one thing they consistently excel at is quickly deploying overwhelming firepower.

Look, I’m not suggesting that the West is destined to go the way of Pol Pot. But such tactics should cause any freedom-oriented individual to pause briefly and take a serious look at precautionary options abroad.

After all, it’s hard to imagine that you’d be worse off for having a portion of your savings in a Hong Kong bank account, holding some gold in a depository in Singapore, or owning a small plot of land overseas in a thriving economy.

But should the turmoil ever come to your town, these steps may prove to be some of the wisest you could ever take.

Whoever said “it’s a small world” never flew across the Pacific.

The flight from Santiago to Sydney is a mind-numbing 14 hours. And then it’s another 8 to Jakarta. Yet along the way are vast stretches of civilizations, resources, and amazing opportunities.

No, the world is a wonderfully massive place. And after a few months’ hiatus, it’s great to finally be back out here again.

Long-time readers know that my normal travel schedule typically takes me to more than 40-countries in a year to check out unique business, investment, and lifestyle opportunities for you.

Yet for the last few months I stopped traveling and hunkered down in Chile planning for the Workshop we held earlier this month.

It took a lot of work to pull off the event and bring such figures as Ron Paul, Jim Rogers, Nigel Farage, and Jim Rickards to Santiago. But it was well worth it.

Now that the workshop is over, though, I’m pleased to be back on the road collecting boots on the ground intelligence for you. And one of the places you ought to know about is Indonesia.

It’s amazing how much this country has changed just since I was here 18-months ago.

In part due to its tremendous resource wealth and enormous population exceeding 250 million, Indonesia is emerging as one of Asia’s most exciting economies. In some ways, it’s in a similar position that China was in 20 years ago.

Because Indonesian wages are so much lower that in China, for example, many of the low-skill manufacturing jobs that generated such prodigious growth in China are now flowing into Indonesia.

Moreover, a vast middle class of tens of millions of high-income professionals, managers, and entrepreneurs is rapidly developing as Indonesians rise through the ranks of their own economy.

(I was happy to see that we even received a few applications from Indonesian students for our upcoming entrepreneurship camp this summer.)

It’s easy to see the results of this economic boom. Indonesia has become one of the region’s most dynamic consumer markets.

People shop. They buy cars, clothes, and smartphones. They enjoy overpriced coffee. They party it up at night. (And on that note, I should mention that Jakarta has a really great nightlife, one of the better-kept secrets in Asia…)

And as so many goods are produced right here in Indonesia, prices are low… often rock bottom. The cost of living here is absurdly cheap compared to just about anywhere else in the world.

Further, the stock market is one of the best performing in Asia, up 17% this year. I’m personally one to invest when things are in the gutter, so instead I’m looking at the Indonesian currency (rupiah), which is currently near a multi-year low.

Have a great weekend.

In the first century AD, the Roman Empire was up to its eyeballs in domestic terrorism.

The biggest threat was a tiny Judaic sect known as the Zealots who routinely conducted public attacks, even against other Jews who didn’t agree with their views.

This is actually where the word ‘zealot’ comes from, and the group constitutes history’s first recorded example of terrorism.

The Zealots knew they could never defeat such a vast Empire… at least, not conventionally.

Instead, their chosen tactic was to create chaos and fear. And for a while they were successful.

Rome finally put down the threat in 74 AD with the siege of Masada. But the idea caught on, and ‘terrorism’ has been with us ever since.

Just in recent days, attacks on civilians have been attempted and/or carried out in Greece, the Philippines, Turkey, Kenya, Taiwan, Iraq, Kosovo, Thailand, Mali, Syria, India, Israel, Nigeria, and the United States.

Here in Indonesia they know a thing or two about domestic terrorism. Over the years, all sorts of religious extremists and separatists waged campaigns in the country.

To draw worldwide attention to their causes, they often conducted attacks specifically against Westerners.

As an example, the JW Marriott Hotel here in Jakarta has been targeted not once, not twice, but three times. Curiously they still have one of the best breakfast buffets in the world…

So what did the Indonesian government do? Why, destroy people’s civil liberties, of course!

Detachment 88 is Indonesia’s special anti-terrorism task force. And go figure, they’re funded by the US government, trained by the CIA, and assisted by US intelligence officers to monitor people’s emails, text messages, and phone calls… all under the auspices of ‘security’.

(My sense is that the US government is ‘field testing’ freedom-sucking counterterrorism measures here in Indonesia before bringing them to the homeland…)

After 10-years, suicide bombings are now on the decline, and the government is crediting the measures they’ve implemented. But this view ignores two obvious points:

1) Indonesia’s economy is in remarkably better shape than it was years ago. Tens of millions of people are being lifted into the middle class and seeing their standards of living improve dramatically.

It’s amazing what a bit of prosperity can do; it doesn’t take much for a young person to realize that having some money and freedom is a better deal than railing against the man and blowing yourself up.

(As an aside, these 50%+ youth unemployment rates in Europe are an epic disaster waiting to happen…)

2) Benjamin Franklin is often quoted as saying that “[t]hose who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety.”

And he did write this, in a letter to the Governor of Pensylvania in 1755. The statement was made in reference to colonists on the frontier who were in danger.

As usual, the state was getting involved… at a high cost.

But Franklin pointed out in his letter that “in the Midst of [the frontier colonists'] Distresses they themselves do not wish us to go farther…” and that “it is next to impossible to guard effectually an extended Frontier…”

He was right. Ultra-committed separatist groups, extremists, and all-around bad guys can always find a soft target.

Guard the airport and they’ll blow up the bus station. Guard the bus station and they’ll take out a public park.

Constant security, paramilitarism, and steady erosion of freedom constitute an enormous price to pay for a false sense of safety against bad people.

Franklin knew this. Let’s just hope that good people heed his wisdom… and have the same respect for liberty as the frontier colonists he wrote about.

Switzerland is the place that has traditionally stood above all the rest in its reputation for financial stability.

Why? Because the currency was well-managed, the banking system was sound, and the country had a long tradition of treating capital well.

Over the last few years, however, these advantages have collapsed.

Switzerland has voluntarily surrendered banking privacy, and the many Swiss banks are now hemorrhaging cash.

Even worse, the Swiss government destroyed its reputation for respecting capital when they pegged the Swiss franc to the euro in 2011 to arrest the franc’s rapid rise.

The country’s top central banker at the time, Philipp Hildebrand, claimed that he would buy foreign currencies in ‘unlimited quantities’ to defend the peg.

This is not something a responsible steward of currency should ever say. The currency peg was nothing more than a form of capital controls… and it effectively screwed anyone that had trusted the Swiss system with their savings.

Since then, the market’s need to find a financial safe haven has only become more desperate. One only needs to look at Cyprus to see why.

Yet just a small handful of countries inspire confidence in the marketplace. And the most popular seems to be Australia.

From a macro perspective, Australia is in much better shape than the rest of the bankrupt western hierarchy.

Though the national budget deficit has been rising over the last few years, Australia’s public debt as a percentage of GDP (less than 30%) is a tiny fraction of the US, France, Italy, etc.

Moreover, as the Australian economy is heavily dependent on resource exports, it’s a ‘commodity currency’, much like Canada. But unlike Canada which is wed to the US, Australia’s economy is much more closely tied to Asia’s growing dominance.

Perhaps most importantly, though, Australia is not printing money with wanton abandon like the rest of the world.

In fact, the RBA’s (Australia’s central bank) balance sheet has actually been -decreasing-, dropping from A$131 billion to just A$81 billion in 2012.

This constitutes a 38% decline in central bank assets in five years. By comparison, US Federal Reserve credit has grown 367% over the same period. This is an astonishing difference.

Plus, Australian interest rates here are typically much higher than in the US, Europe, or Canada. Just holding cash in an Australian bank account can yield over 4% in annual interest. It’s sad to say, but this is quite a bit these days…

(Attendees at our Offshore Tactics Workshop were able to open such accounts on the spot with an Australian bank representative; we’ll soon send out information about how you can do this as well…)

Now, there’s really no such thing as a “good” fiat currency. But given such fundamentals, it’s easy to see why Australia is replacing Switzerland as a global safe haven.

I’ve spent the last few days with some banker friends of mine, and they’ve been telling me about the surge of foreign capital coming into Australia from Europe, the US, and China.

But one thing to keep in mind, they reminded me, is that the Australian dollar has a loose correlation with the price of gold. After all, gold is Australia’s third biggest export.

Consequently, we’ll likely see a decline in the Aussie dollar if the gold correction continues to play out. This may prove to be a good entry point for individuals to get their money out of the US dollar.

Somewhere, Paul Krugman is smiling.

The Nobel Prize winning economist, whose brilliant ideas include:

• spending your way out of recession
• borrowing your way out of debt
• conjuring unprecedented amounts of currency out of thin air without consequence
• staging a false flag alien invasion of planet Earth

is perhaps most famous in certain circles for calling gold a “barbarous relic“. He also recently suggested that Europe’s failing euro monetary union is the modern day equivalent of the gold standard. I’m told he was completely sober when he said this.

Of course, Krugman is smiling right now because he thinks that he’s been proven right. Gold’s massive sell-off over the last few days has shaved over $200 from the metal’s nominal price… a steep move any way you look at it.

And as Krugman has been saying, ‘gold is not a safe investment.’ But that’s because he fails to understand the fundamental premise of gold.

Gold is, in fact, a terrible investment. It’s an even worse speculation. But let’s look at what those actually mean–

When you ‘invest’, you risk a portion of your savings, typically for several years, hoping for a nominal gain when denominated in paper currency. You buy for $1,000 and you sell for $2,000.

‘Speculating‘ involves taking much higher risk, often for shorter periods of time with a smaller percentage of your portfolio, hoping for outsized nominal gains when denominated in paper currency. You buy for $100 and you sell for $2,000. But you could easily lose everything.

Well, gold makes for a really bad speculation. Like almost any real asset, it can’t really go to zero. It’s physical. It’s real. It’s always going to be worth something. And for physical gold, there’s very little leverage available.

Gold makes for a bad investment too… because in either case, the price of gold tends to rise and fall over the long-term with inflation and inflation expectations. If it’s leading (or keeping pace with) inflation, then you can’t expect much of an inflation-adjusted return.

But these reasons for buying gold miss the point.

Gold is a proxy against the financial system. It’s a way to withdraw savings from a corrupt fiat currency and hold something that cannot be conjured out of thin air by a tiny banking elite. We don’t buy gold hoping to sell it down the road for even more paper currency.

This is the same reason why I’m buying so much agricultural property in South America… it’s controlled by nature, not by men. Plus, I get paid huge dividends by way of organic fruit.

If you look at the fundamentals briefly, gold had a major sell-off this morning in part because the Chinese reported poor economic data. In addition there was Friday’s pitiful consumer numbers in the Land of the Free.

Yet with–

- poor economic data still abounding from the US to China…
- massive, debilitating debt still accumulating…
- Europe still completely bust..
- Japan promising unprecedented money printing in an era already marked by unprecedented money printing…

… what will the general trend be? Will central bankers around the world continue printing money?

It certainly seems likely. If they stop printing, interest rates surge… and nearly every government in the developed word will go bankrupt. That’s a big incentive to bankers.

With this in mind, while the gold correction probably has quite some time to play out, the long-term trend is obvious.

The wealthy have been diversifying internationally for centuries. Baron de Rothschild famously sent four of his five sons to different points of the compass: one to London, one to Paris, one to Naples, and one to Vienna.

Russian oligarchs and Arab oil sheikhs have been calling London home for decades, while spending their summers partying in Ibiza, Monaco, or the south of France.

Billionaire US hedge fund manager, Julian Robertson, the founder of Tiger Asset Management, meanwhile, has chosen New Zealand as a place to hang out, and a safe parking spot for part of his vast fortune.

I had the pleasure of visiting his stunning Kauri Cliffs Lodge the other day. Breathtaking is the only way to describe it. Originally all a sheep farm, this 6,000 acre piece of cliff-top, ocean-view property at the top of New Zealand’s North Island has been partly transformed into a luxury lodge and spa, with a spectacular golf course, consistently ranked among the top 100 in the world.

But you don’t need to be a billionaire to buy a beautiful hideaway in this part of the world. Up the road a little way is a 27 hectare property with a modern 4 bedroom / 2 bathroom home advertised at NZ$795,000.

In the little township of Whangaroa Harbour, I saw at least half a dozen places for sale — all with stunning ocean views. The market is soft, and it seemed that with a bit of patience, and some hardball negotiating skills, one could pick up a real bargain.

The climate up here is pleasant. Technically, it’s “sub-tropical,” and there are pockets of rainforest. Winters are very mild compared to the south of the country. It’s very green. Even though there’s supposedly been a drought this year, the dairy pastures — which are EVERYWHERE — are still lush.

For the right person, this place could easily make an ideal second home, or pleasant bolt hole to escape to in case all hell breaks lose in North America and Europe.

But, even if you have nothing to your name and are just starting out in life, I think New Zealand has a lot to offer.

The economy here is based predominantly on agriculture, with an emphasis on dairy farming. And New Zealand is rapidly becoming China’s milk supplier of choice.

During this week, New Zealand’s Prime Minister, John Key, was in China cementing the long-term future of the country’s relationship with Beijing. New Zealand’s dairy conglomerate, Fonterra, is also investing heavily in China, and it seems the Chinese are very keen to have them.

The owner of the bed & breakfast I stayed at said he’d owned two dairy farms in his time. He said land values remain good, and that the long-term prospects are bright.
The industry is changing though. Small mom and pop operations with 150 cows, which were the norm last generation, have given way to larger operations, with herds typically numbering 1,000+.

The business has become more scientific. And there is great demand for young people with agricultural science degrees. Like elsewhere in the world, far too few people in New Zealand have chosen to study agriculture over the past 20 or 30 years.

A young, ambitious person open to relocating to New Zealand could do a lot worse. As Jim Rogers says, in 20 years’ time, it won’t be bankers and brokers driving Maseratis, but farmers instead.

Until next time,

Tim Staermose, Chief Investment Strategist
Sovereign Man

[Editor's note: Tim Price, Director of Investment at PFP Wealth Management and frequent Sovereign Man contributor is filling in while Simon is viewing agricultural property today.]

These are certainly days of miracle and wonder. Well, of absurd and extraordinary financial experimentation, at any rate. 

Last week, for example, saw the Bank of Japan abandon any last pretense of restraint and topple headfirst into a gigantic pile of monetary cocaine. 

The scale of the policy is daunting: the Bank of Japan intends to double the country’s monetary base over two years via the aggressive purchase of long term bonds. 

It would be difficult to overstate the drama of this monetary stimulus(although we favour the word debauchery). 

Yet as the Japanese monetary authorities declare a holy war against deflation, it would only be fair to draw attention to the colossal opportunity being presented as the antidote to monetary intemperance, namely gold and gold miners. 

There is a clear mismatch between the prices of gold and silver mining shares and spot prices of gold and silver. But as to why the miners are trading so poorly relative to the physical is unclear to us.

It may be because the market expects the price of gold and silver to fall (not a belief to which we subscribe, given current monetary events for example in Japan). 

It may be because the rise of gold exchange-traded funds has removed a natural bid for shares of the miners. 

And it may be because the market is waiting for goldbug hedge fund manager John Paulson to capitulate on his own holdings of precious metal mining stocks. 

Nobody knows. We are merely content to play the long– and rational– game. 

As Lee Quaintance and Paul Brodsky of QB Partners point out, “the ratio [Mining share prices to spot gold] is again at its ten year weekly low. If there is any remaining validity to the merits of investing in financial assets based on historical value, this would be the time to buy miners.” 

They go on to add (and we concur), 

“Our strong bias is that prices of bullion will rise significantly. Selling the miners at current absolute and relative valuations would be tantamount to throwing in the towel on the entire concept of value investing, now and in the future.” 

“The reality is that we cannot be 100% sure of the outcome from all the monetary mayhem in Europe, Japan and the US, and we do not have a good sense of timing if and when our outcome proves correct. . . All we can do is try to recognize value within the context of current and extrapolate-able events.” 

We agree that the temporary weakness of the price of bullion is a buying opportunity in light of Japan’s vast money-printing experiment. And the same likely holds for the price of gold mining companies. 

Bear in mind, though, that as the money printing ritual goes on, the prices of everything are being so grievously distorted. Doubt is uncomfortable in this environment. But certainty is absurd.

A few days ago, Italian authorities stopped a man who was making his way across the border into Switzerland with his wife and three children.

They searched his car and found, literally, a ton of gold bars hidden in a floorboard storage compartment.

Needless to say, the gold was confiscated, the car was impounded, and the man was arrested, despite the fact that it’s perfectly legal to own and transport gold.

Now, the European Union does require that ‘cash’ in excess of 10,000 euros be declared when crossing borders.

Yet article II of EC regulation 1889/2005 states that “cash” for the purposes of declaration includes legal tender currency plus monetary instruments in bearer form– travelers cheques, promissory notes, bearer bonds, and stock certificates. Not gold. And certainly not gold bars.

So the man was actually well within his legal rights. But it didn’t matter. They nabbed him on ‘suspicion of money laundering.’

As one of the most bankrupt European Union member states, Italy is going down a very dangerous road indeed. They’ve already imposed bank withdrawal restrictions, raised taxes, and openly flirted with bank nationalization.

No doubt, after watching what happened in Cyprus, Italians are scared.  And they’re not the only ones.

Candidly, everyone living under a bankrupt, insolvent government should consider the very strong possibility that their savings will be plundered, their retirement accounts seized, and capital controls imposed.

These ideas aren’t alarmist or sensational; even the most cursory look back on history shows that desperate politicians almost always fall back on the same old playbook of confiscating their citizens’ wealth.

Are the chances of this happening 100%? No. But the likelihood is certainly greater than zero. It would be dangerously foolhardy to adopt a strategy of blissful ignorance and merely assume that “it won’t happen here.”

Consequently, rational, thinking people ought to consider prudent options to move a portion of their assets, savings, income, and even lifestyle overseas to safe, stable jurisdictions.

This doesn’t necessary require a radical change to the way you live your life. It’s merely having an insurance policy.

If the worst happens and governments follow the historical pattern of confiscatory rampages, you’ll be in an excellent position.

But if nothing happens, you won’t be worse off for having moved some precious metals to Singapore, or having transferred some savings to a Hong Kong bank account, or having purchased productive agricultural property in South America.

This isn’t about tax evasion, terrorist financing, or criminal money laundering. It’s about putting your family before your politicians… and preserving what you’ve worked your entire life to build.

Just make sure these steps are executed rationally, and prudently.

For example, I’ve been advising our premium members for quite some time to NOT move precious metals abroad themselves. Leave that to established companies like Viamat and Malca Amit which specialize in global secure logistics.

And be mindful of the jurisdiction that you choose; it’s imperative to select a place that has a tradition of respecting privacy and strong economic fundamentals.

This effectively eliminates most of Europe and North America, though some options in Switzerland, Andorra, Liechtenstein, and Austria may make sense.

Asia, particularly Singapore and Hong Kong, are much healthier and present better options for precious metals storage.

The good news is that Australia now has a goodly number of investor-friendly immigration programs designed to bring productive foreigners into the country, similar to the trend we’re seeing across Europe.

On the flip side, though, the Australian government has just announced new rules which penalize citizens who have responsibly set aside savings for their own retirement.

Any income over A$100,000 drawn from a superannuation fund (the equivalent of an IRA in the United States) will now be taxed at 15%. Previously, all such income was tax-free.

The really offensive part about this is that the government is going to tax people’s savings ‘on both ends,’ meaning that people are taxed on money they move INTO the retirement fund, and now they can be taxed again when they pull money out.

The Cyprus debacle drew a line in the sand– fleecing people with assets, or income, in excess of 100,000 dollars, euros, etc. is now acceptable. This is the definition of ‘rich’ in the sole discretion of governments.

And make no mistake– if it can happen in Australia, which still has reasonable debt levels despite years of deficit spending, it can happen in bankrupt, insolvent nations like the US.

As you may know, US tax code allows for several different types of retirement accounts… and there has been a lot of talk lately about a ‘Roth conversion’.

This is to say that a US taxpayer can convert his/her traditional IRA to a Roth IRA. And the implications are enormous.

A traditional IRA is not taxed on the way in, but it’s taxed on the way out. So if you contribute $3,000 annually to your IRA, you won’t pay income tax on that $3,000. But the accumulated retirement savings is taxed in the future when you withdraw the funds at retirement.

Conversely, contributions to a Roth IRA are taxed each year with the rest of your income. But the accumulated savings are NOT taxed when you withdraw the funds at retirement.

A few years ago, Congress inked a deal to allow US taxpayers to CONVERT their traditional IRA to a Roth IRA. In doing so, Americans were allowed to pay tax on the accumulated gains in their traditional IRA up through that point, then switch to a Roth.

Congress was essentially saying, “We promise that we will only tax you now in exchange for not taxing you later.”

It certainly begs the question: How much do you trust your government?

Can we really expect the country that has racked up more debt than any other in the history of the world to keep its word? Can we really expect that 5 or 10 years from now, they won’t make another grab for cash?

If the Australian government can unilaterally change the rules and start double-taxing retirement accounts, so can the US. And the trillions of dollars in retirement savings in the Land of the Free is far too irresistible for them to ignore.

Reporting from Santiago, Chile

Of course. Who hasn’t?

Fear. Love. Panic. Exuberance. Jealousy. Desire. These emotions have tremendous influence over human behavior. And when they kick in, they skew our judgment and cause us to do things that can only be characterized as highly irrational.

In the world of economics and finance, they call this ‘sentiment’. Consumer confidence, business confidence, investor confidence… these are basically emotional readings. Screw the numbers. To hell with the truth. It’s all about how people feel.

It seems crazy, but it’s true. Right now, for example, ‘sentiment’ is telling us that the euro crisis is over. It’s telling us that the debt ceiling is pretty much resolved. And, after taking five years to reach pre-crash levels, it’s telling us that the stock market is once again safe for the average investor.

Yet the numbers tell a completely different story.

In the US, politicians are celebrating their accomplishments that the US unemployment rate has declined to 7.6%.

Of course, the real figures show that the labor force participation rate (effectively the percentage of society that they consider to be in the work force) has just hit a 30-year low. And the economy is failing to create new jobs.

Perhaps most of all, the US debt level this year will hit the danger zone that Greece was in just a few years ago when the European debt crisis kicked off in earnest.

In Europe, the situation is so bad that even the government figures are dismal. Italy is officially in a deep recession. Spain is posting a public deficit over 10% of GDP. The Greek economy shrank (officially) nearly 6% last year. Etc.

Bottom line, the numbers don’t match up with sentiment at all. And this makes for precarious investment conditions.

Over the first quarter of this year, US stock mutual funds reported $52 billion in retail investment inflows, according to market data firm TrimTabs. This is the highest inflow in a decade.

In January of this year, retail investors poured a record $77.4 billion into the stock market. To put this in perspective, the prior record, set in February 2000, was $23.7 billion.

You can probably guess how that turned out. This whoosh of money into stocks happened mere months before the crash.

It certainly seems strange when you stack it all together: on one hand, record high deficits, record high debts, record low labor force participation. On the other hand, record high stock market, record high mutual fund inflows.

Something just doesn’t add up.

Investors are throwing caution to the wind right now… ignoring the basic fundamentals and focusing exclusively on euphoric sentiment. (Or central bank policy).

Some of you may know that I was a competitive fighter for a number of years. I can personally attest, and any boxer will tell you, that it’s the punch that you don’t see coming which knocks you out.

Reporting from Sovereign Valley Farm, Chile

The classic presumption is that if you go offshore– foreign bank account, overseas safety deposit box, foreign trust, foreign corporation, etc.– then you MUST be doing something wrong.

This is an absurd conclusion and only highlights how brainwashed most people have become.

The world has become a gigantic financial nudist colony, full of government agents who pry ever more deeper into our nether regions looking for loose change betwixt the sofa cushions. Yet people are all too willing to comply. And anyone who shows up with a bath towel is branded a criminal or financial terrorist.

Clearly there are people who use offshore jurisdictions to hide graft or fraudulent activities. But this is not unique to the offshore world.

The #1 tax haven in the world, in fact, is none other than the United States of America. More ill-gotten wealth is hidden in Wall Street banks through Delaware corporations than any other place on the planet.

Yet the attention is always focused on places like the British Virgin Islands, Channel Islands, Liechtenstein, Switzerland, Cook Islands, Panama, Seychelles, Hong Kong, etc.

Just yesterday, the farcically named Center for Public Integrity released a fifteen month study based on ‘leaked’ documents from various international financial centers. The data shined a spotlight on the financial dealings of nearly 130,000 individuals in jurisdictions around the world.

The group’s assessment is anything but flattering: “This investigation lifts the curtain on the offshore system and provides a transparent look into the secret world of tax havens and the individuals and companies that use and benefit from them.”

Just think about the implications. They’re essentially saying that nobody has the right to financial privacy… and that deriving ‘benefit’ is somehow evil and wrong.

Fact is, moving money and assets offshore is not illegal. It’s perfectly legal, as long as you pay tax on the income and make the appropriate disclosures.

And despite the media hype, this is not something that’s just for the criminal terrorist class. As a matter of fact, going offshore is one of the best tactics to protect yourself against the criminal terrorist class… and by that, I mean central bankers and politicians.

Insolvent governments throughout history have ALWAYS resorted to a very limited playbook. Capital controls, wage and price controls, direct confiscation of assets… these tactics are nearly foregone conclusions in heavily indebted countries.

Just look at what happened in Cyprus. Look at what’s happening in Argentina. The evidence is overwhelmingly obvious. Pretending that ‘it can’t happen here’ is dangerous thinking.

There is going to come a time, likely soon, that retirement savings will be targeted. Capital controls are already in the works, cheered along by economic ‘luminaries’ like Paul Krugman. Central bankers will continue to steal the purchasing power of our hard-earned savings. It’s happening.

Moving a portion of your assets abroad isn’t criminal. It’s not crazy. If properly disclosed, it’s one of the sanest things you can do to protect yourself against the real criminals.

Reporting from Sovereign Valley Farm, Chile.

I’ve now retreated from the bustle of the big city to my Sovereign Valley farm for some rest and reflection, and yesterday I had the pleasure of hosting Peter Schiff and his wife for the evening.

In between getting beaten by Peter in ping pong and eating delicious organic food from the farm, Peter and I sat down and recorded something for you. You’ll hear us talk about:

• the difference between Ben Bernanke’s printing press and my printing press
• why you should think twice about buying farmland unless you’re a farmer
• farming in the United States vs Chile
• what happens when you speak the truth
• Peter’s advice on getting out of the US dollar and US assets

Can’t hear anything? Download the mp3 instead (right-click and save).

Just imagine the scene: Ron Paul, Jim Rogers, Nigel Farage, Jim Rickards, and Peter Schiff, all on stage at the same time, Saturday night, in Santiago, Chile.

This was so fantastical that when we posted the photo of the group on our Facebook page yesterday a lot of people thought it was an April Fools’ joke.

And yet, that was the starting line up for our Offshore Tactics Workshop that just concluded this afternoon.

It was easily the most exhausting yet exhilarating thing I’ve done.

In addition to our honored keynotes we had bankers, brokers, immigration specialists, tax attorneys, gold providers, from all over the world, to assist our nearly five hundred attendees start diversifying their assets, interests, and businesses overseas.

Almost every day it seems like there’s a new threat emerging that poses a huge risk to our lives and livelihood; the recent events in Cyprus have driven this point home to anyone paying attention.

The idea of diversifying internationally is one that has existed for centuries. It was once only available to the wealthy, but in our modern age anyone can do it.

With the proper strategy this can be one of the best ways to preserve your liberty and livelihood, and it is something that makes sense no matter what.

Last night at dinner a close friend of mine told me that he had opened a bank account in Singapore at our workshop over the weekend. He told me:

“I’m doing a lot of business in Asia now anyhow so this obviously makes sense, and if they ever try to steal money out of peoples bank accounts in the US I’ve already moved my wealth to a country that has never had a bank failure in its history.”

Even our keynotes weighed in on these issues as we discussed everything from confiscation of retirement accounts to the criminalization of gold.

Needless to say, the insights that came out of this weekend were eyeopening, and for many I suspect, life changing.

Fortunately we hired a professional film crew to capture it all on video, and we’ll be making that available soon.

Until tomorrow,
Simon Black

It’s as much about your mindset and the way you view the world and the events that are happening around you.

Your worldview is heavily dependent on the knowledge and ideas that you are exposed to, but as demonstrated some people don’t want to learn, neither from books nor from history.

Take Ben Bernanke for example.

Is it surprising that the economy is on the brink of collapse when he and so called leading economists have based their whole worldview on faulty Keynesian economic theories?

The consequences might be surprising to them, but not to us, because we know better. We’ve learned from history.

Albert Einstein said, that “any man who reads too much and uses his own brain too little falls into lazy habits of thinking,” but to make the best use of your brain it helps first having an accurate understanding of reality, and of where the world is heading.

So to that end, here are some books to get you started:

• The Road to Serfdom

  by Friedrich A. Hayek

  The Godfather of the Austrian School of economics, Hayek explains the vitality and necessity of economic freedom better than anything else I’ve read.

  Read/Download for free at the Mises Institute

• Atlas Shrugged

  by Ayn Rand

  This book teaches you the basic principles of reward being in proportion to the value you add to other people’s lives. It also helps you to step out of the victim frame and start to realize that nobody else owes you a goddamn thing and you have to build/contribute something that other people want before you have a claim to anything.

• Anatomy of the State

  by Murray N. Rothbard

  You might have heard me mention the concept of reducing your sovereign risk before, i.e. not trusting any one government with your money or your safety. When you diversify to protect yourself against the state, it helps first knowing the true nature of the state. This book will help you with that.

  The state is not the same as society, and the state is certainly not “we.” As the book description says, Murray shows “how the state wrecks freedom, destroys civilization, and threatens all lives and property and social well being.”

  Read/Download for free at the Mises Institute

• Adventure Capitalist

  by Jim Rogers

  Jim– one of the speakers at our event down here in Chile this
  weekend, is the only person I know who has traveled to more places
  than I have.

  And in his world travels putting boots on the ground, Jim developed
  first-hand insights that took other investors at least 10-years to
  realize… from China’s rise to Mongolia’s potential to the toxic
  destruction of the euro.

  Jim’s book is a must-read for anyone who is looking to do business and
  invest worldwide.

• Currency Wars

  by James Rickards

  Great book that discusses the absurdity of the fiat experiment, why it will fail, and what governments around the world are likely going to do next to keep the party going (plus why this is destructive)

  And if you want to learn more about what sound money really is, then here’s a bonus tip for you: What Has Government Done To Our Money by Murray Rothbard (free download via Mises Institute)

• Daemon and then Freedom (the sequel)

  by Daniel Suarez

  Fiction. Amazing story. I don’t want to spoil it, but you won’t want to put it down. These books really helped shape my view of resilience and system dependency.

  Some concepts you’ll learn about are decentralization, drones, dark nets, cryptography, augmented reality, self-sufficiency, and other concepts relevant for a resilient future.

“The man who does not read has no advantage over the man who cannot read.” ― Mark Twain

As a property investor and speculator, I’m always studying trends and looking for anomalies. Learning about the history of a place, how it came to be as it is today, and then making predictions about what it will be like in the future is something I do both for leisure and for profit.

It’s definitely not an exact science, but when you find enough indicators (that still haven’t drawn much attention for the public at large) pointing in one direction, you realize the odds are significantly stacked in your favor and that it’s time to buy.

As Jim Rogers has said, the true investor hates to gamble with his/her money. Instead, they look for situations where an investment is such a screaming deal that it’s almost like walking over and picking up a pile of money.

It sounds great, the only problem is that these kinds of situations don’t come along every day, and when they finally do present themselves, they’re not always so easy to recognize.
Over the last few years here in Chile, I’ve come across things like this a couple of times (which is way more often than I normally encounter these on my travels) and just recently, I was fortunate enough to stumble upon another.

I can’t give away the location of this exact spot just yet but I will say it’s probably one of the most obvious no-brainer investments I’ve ever come across. The place looks just like the central coast of California, only 1.25 acres of beachfront property here sells for about $20,000 USD, not $2,000,000 USD.

Parts of the central Chilean coastline have just started to become popular in the last year or two but not this place. Most of my local friends from the city have never heard of it, which is just the way I like it. A place that’s not even on the map yet where you can still find rock bottom prices.

Not all coastal land in Chile is a deal. Actually, a lot of places have gotten quite expensive already and land just 45 minutes away from this beach sells for over twice as much as property in this particular area.

After nearly 3 years of exploring the central coast, scouting the back roads, getting to know locals, and constantly comparing property prices, this place really stands out.

This weekend at Simon’s event, I’ll be speaking about other striking anomalies that I’ve come across during my time in Chile as well as sharing more about ways to gain exposure to these kinds of places in the coming weeks in this letter.

Stay tuned,
Darren Kaiser

One would think that certain truths are obvious by now.

It should be obvious, for example, that there are consequences to living beyond your means.

It should be obvious that there are consequences to a long history of spending unsustainably and accumulating mountains of debt.

And it should be obvious that there are consequences to dealing with such problems by spending more and accumulating even more debt.

It should be obvious. But it’s not.

In Europe, politicians are hailing their responses to the Cyprus crisis as a success. They pretend like everything is OK, notwithstanding the capital controls now imposed.

Keep moving people, nothing to see here.

Curiously, institutional investors have mostly shrugged off the turmoil. European markets are down just a few percentage points… which is not even considered a correction let alone a crash.

Gold, when denominated in euros, has ticked up a few percentage points. Like sheep running in to a burning barn, most institutional investors have piled into US Treasuries for ‘safety’, bidding the 10-year yield down from 2.05% to 1.91%.

Frying pan. Fire.

(As an aside, it’s incredible that these institutional money managers get paid tens of millions of dollars to manage people’s hard-earned savings. And yet, they view the US government… the greatest debtor in the history of the world… as ‘risk-free’. It’s genius!)

Meanwhile, back in the Land of the Free, mainstream financial press is toasting the economic recovery, particularly as the housing recovery picks up steam.

Yet as anyone who has cracked open a book on monetary history and financial crises can tell you, THIS is how it starts.

In the early 1790s, for example, the interim government of post-revolutionary France began an experiment with paper money called assignats.* Famous orators declared it a panacea to the crisis that had been plaguing the country at a time when people were begging for solutions.

Initially the results were very promising, and property prices began to rise. People cheered their perceived ‘wealth’ and asked for even MORE paper money.

Of course, it didn’t take very long for a currency crisis to develop… and within a few years, hyperinflation, capital controls, and failed price controls had taken hold.

In the Weimar Republic, the same thing happened when the government switched from ‘gold marks’ to ‘paper marks’. Initially, asset values rose. Stocks and property surged, and people felt very wealthy.

Shortly after, the currency collapsed. Pianos became a medium of exchange, and paper marks became nothing more than fuel for furnaces.

Hyperinflation always starts with a surge in asset prices. And as I see stock markets at new highs, property prices posting big increases, and bond yields of the greatest debtor nations in the world hover at just over ZERO, a sane person ought to consider these important lessons from history.

* Recommended reading: Andrew Dickson White’s Fiat Money Inflation in France, available for free online(PDF).

To anyone paying attention, reality is now painfully obvious. These bankrupt, insolvent governments have just about run out of fingers to plug the dikes. And history shows that, once this happens, governments fall back on a very limited playbook:

1. Direct confiscation

   As Cyprus showed us, bankrupt governments are quite happy to plunder people’s bank accounts, especially if it’s a wealthy minority.

   Aside from bank levies, though, this also includes things like seizing retirement accounts (Argentina), increases in civil asset forfeiture (United States), and gold criminalization.

2. Taxes

   Just another form of confiscation, taxation plunders the hard work and talent of the citizenry. But thanks to decades of brainwashing, it’s more socially acceptable. We’ve come to regard taxes as a ‘necessary evil,’ not realizing that the country existed for decades, even centuries, without an income tax.

   Yet when bankrupt governments get desperate enough, they begin imposing new taxes… primarily WEALTH taxes (Argentina) or windfall profits taxes (United States in the 1970s).

3. Inflation

   This is indirect confiscation– the slow, gradual plundering of people’s savings. Again, governments have been quite successful at inculcating a belief that inflation is also a necessary evil. They’re also adept at fooling people with phony inflation statistics.

4. Capital Controls

   Governments can, do, and will restrict the free-flow of capital across borders. They’ll prevent you from moving your own money to a safer jurisdiction, forcing you to keep your hard earned savings at home where it can be plundered and devalued.

   We’re seeing this everywhere in the developed world… from withdrawal limits in Europe to cash-sniffing dogs at border checkpoints. And it certainly doesn’t help when everyone from the IMF to Nobel laureate Paul Krugman argue in favor of Capital Controls.

5. Wage and Price controls

   When even the lowest common denominator in society realizes that prices are getting higher, governments step in and ‘fix’ things by imposing price controls.

   Occasionally this also includes wage controls… though wage increases tend to be vastly outpaced by price increases.

   Of course, as any basic economics textbook can illustrate, price controls never work and typically lead to shortages and massive misallocations.

6. Wage and Price controls– on STEROIDS

   When the first round of price controls don’t work, the next step is to impose severe penalties for not abiding by the terms.

   In the days of Diocletian’s Edict on Prices in the 4th century AD, any Roman caught violating the price controls was put to death.

   In post-revolutionary France, shopkeepers who violated the “Law of Maximum” were fleeced of their private property… and a national spy system was put into place to enforce the measures.

7. Increased regulation

   Despite being completely broke, governments will dramatically expand their ranks in a last desperate gasp to envelop the problem in sheer size.

   In the early 1920s, for example, the number of bureaucratic officials in the Weimar Republic increased 242%, even though the country was flat broke from its Great War reparation payments and hyperinflation episode.

   The increase in both regulations and government officials criminalizes and/or controls almost every aspect of our existence… from what we can/cannot put in our bodies to how we are allowed to raise our own children.

8. War and National Emergency

   When all else fails, just invade another country. Pick a fight. Keep people distracted by work them into a frenzy over men in caves… or some completely irrelevant island.

Like Lehman Brothers before it, Cyprus may well come to be seen not so much as the cause of further crisis but as yet another symptom of the ‘long emergency’ that continues to suffocate the western economies.

We would describe this emergency as, fundamentally, an inevitable crisis triggered by an unsustainable explosion of credit; western banks and western governments are now like Macbeth’s “…two spent swimmers, that do cling together / And choke their art.”

The prime minister of Luxembourg, Jean-Claude Juncker, has provided two clear insights into this world of deceit:

“We all know what to do, we just don’t know how to get re-elected after we have done it.”

And,

“When it becomes serious, you have to lie.”

This is what we now have by way of government: a self-serving elite who cannot be trusted, operating to a timetable defined by, and limited to, the electoral cycle.

This liberty deficit is possibly more severely damaging than the supposedly intractable fiscal one that lies beneath it. Yet whatever emerges from the disaster, Cyprus has reminded us of a couple of awkward truths:

1. A deposit in a bank is not a riskless form of saving.

   We may not see eye to eye with the FT’s Martin Wolf on many aspects of modern economics and central banking in particular, but he described banks well last week:

   “Banks are not vaults. They are thinly capitalised asset managers that make a promise– to return depositors’ money on demand and at par– that cannot always be kept without the assistance of a solvent state.”

2. When states become insolvent, the piper must ultimately be paid. Fatal, embarrassing insolvency is not a problem that can be perpetually or painlessly deferred.

Cyprus matters not because of the size of its economy or because it is (for the time being) a member of the euro zone.

It matters because the inept handling of its crisis last week threw one facet of modern banking into sharp relief: if a deposit guarantee is seen to be fraudulent or sufficiently fragile to be easily smashed by politicians, then confidence in banks, and in unbacked paper currency itself, will be vulnerable to an unpredictable run.

CLSA strategist and financial market historian Russell Napier writes as follows:

“The key impact will be long term as the citizens of the Euro, like the citizens of the Soviet Union or the American colonies before them, eventually reject the sacrifice of political rights necessary to support the system.”

“When the history books are written, the Brussels-imposed sequestration in Cyprus will be seen as the tipping point when the citizens of the Euro system realized that the socio-political sacrifice needed to sustain a single currency was just too great.”

Actions have consequences. Cyprus may end up being a storm in a teacup. Like Russell Napier, we fear it may well be the start of something altogether more sinister.

If you have yet to consider the sanctity, stability, ‘store of value-ness’ and true safety of the paper currency you hold within the banking system, now might be a good time to start.

Sometimes I wake up and I’m just astounded at how quickly things are unraveling.

Just look at a few big picture points:

• The Russians are now wagging their fingers at Europe, comparing the EU to the Soviet Union for trying to plunder Cypriot bank accounts. This on the heels of a wealthy celebrity ‘defecting’ from the high-tax West to low-tax Russia.

• Even the chairman of the Federal Reserve acknowledges that, while the US stock market is at an all-time high, adjusted for inflation it is “some distance from the high…”

• The price of Bitcoins has soared 500% year to date when denominated in both dollars and euros. Since Cyprus announced its intended bank levy on Saturday, Bitcoins are up nearly 50%.

• Spanish youths are fleeing the country in droves; here in Chile, the number of immigrants from Spain has jumped 16.4% in the last two years… and in Ecuador, it’s a whopping 51.6%.

• Japan, traditionally an export powerhouse, has posted a trade deficit for eight months in a row… the longest streak in 33 years.

• After the German government announced its intention to repatriate their gold holdings from the US back to Germany, a Swiss political party is pushing for a vote to do the same.

• Military detention and citizen assassination are now perfectly legal in the Land of the Free… meanwhile the national debt has just hit $16.74 trillion, 108% of the country’s GDP.

Frankly, our Offshore Tactics Workshop that’s going to take place next week down here in Chile couldn’t come at a better time. And I have no doubt that the 400+ attendees will arrive energized and motivated.

I’m about to head off to the farm to spend the weekend gathering my thoughts before the big event. But before I go, I wanted to answer the most frequently asked question we received this week–

“Given what happened in Cyprus, how safe is offshore banking?”

We received this dozens of times this week… but the real question to ask is, “How safe is BANKING, of any kind, anywhere in the world?”

Most banks in the West are already technically insolvent. They have very little cash as a percentage of deposits (typically less than 2%), and their books are loaded up on toxic debt owed by sovereign governments that have no hope of paying.

If they weren’t getting money for free from central banks, most commercial banks wouldn’t exist right now.

And herein lies the problem.

Insolvent commercial banks are backed up by insolvent government insurance agencies, funded by central banks that conjure money out of thin air.

Yet most people don’t think twice about where they put their money. They believe, foolishly, that their money is ‘safe’ because it’s guaranteed by the government.

If history has taught us anything, it is that government promises are not worth the paper they’re printed on.

Consequently, people should conduct EXTENSIVE due diligence, not only on their bank, but also on the jurisdiction. You wouldn’t just hand your hard-earned savings to some guy on the street… why should a bank be any different?

In our regular conversations and writings to premium members, I’ve long advocated banking at strong institutions in stable jurisdictions– places like Singapore (which has NEVER had a banking failure), or Hong Kong. Not Cyprus… England… or the US.

Be very cautious about parking your money anywhere that has a significant debt burden. They will print. They will inflate. They will confiscate. Savers will lose. This has been a long-standing tradition in history, and one that everyone should heed.

Bottom line, pay close attention to where you put your money, and in what currency. Because a 10% haircut from the government is the same as a 10% loss of purchasing power from inflation.

In 1729, that Jonathan Swift (of Gulliver’s Travels fame) penned a famous satirical essay from England entitled “A Modest Proposal.” It’s still famous to this day as mandatory reading in many a high school literature class.

As you may recall, Swift addresses the problem of the ultra-depressed Irish economy and mockingly advocates that the Irish should sell their children for rich Englishmen to eat. Lovely thought.

I thought about the essay this morning when one of our Liberty Alert Service researchers alerted me to a new bill just introduced in the Land of the Free, HR 1160. The bill aims “to set the retirement benefits age for today’s six-year-olds at age 70.”

Maybe Swift wasn’t so far-fetched. Screw the kids.

No doubt, governments are adroit at finding ways to steal from people. As the case of Cyprus demonstrated over the weekend, they’re quite happy to propose confiscating funds at gunpoint.

They’re also adept at seizing assets. In the Land of the Free now, there are hundreds of state, local, and federal agencies which have all the power they need to seize your property for violating some obscure regulation.

Then there are more subtle methods like inflation– a slow, steady theft of people’s purchasing power. Or taxation– outright theft masquerading as patriotism.

This legislation is just another form of theft, and one of the most despicable– pushing today’s obligations onto the shoulders of future generations.

Moreover, based on the government’s own monkey mathematics, social security faces an $8.6 trillion shortfall over the next 75-years… which is precisely the window of today’s kids.

It seems almost surreal that a politician’s solution to this is to move the goalposts back by a mere 3-5 years on receiving benefits.

It’s the same sort of thinking that pervades the political elite– that they can afford to kick the can down the road indefinitely, forever, with only the occasional band-aid fix.

It seldom works out that way. History shows that collapse comes very suddenly, often after months (or years) of false government promises. Just look at Cyprus.

Today’s youth is going to have to pay into this bankrupt system for their entire working lives. And when it comes time to collect, there won’t be a penny for them.

It’s a terrible situation when you think about it– if this Ponzi scheme collapses soon, it’s today’s retirees and working adults who get screwed. If the Ponzi scheme collapses in the future, it’s today’s kids who get screwed.

Neither option is particularly attractive. And anyone under 50 should plan on heading into retirement without government support.

Maximizing IRA contributions certainly helps; just make sure to set up a Global Self-Directed IRA to ship your retirement savings overseas. You’ll be able to do things like buy foreign property or store physical gold abroad.

Moreover, if you set yourself up overseas, it’s possible to LEGALLY reduce the amount that you’re paying into the system through the Foreign Earned Income Exclusion and Double Taxation Agreements.

All of these steps are completely legitimate. And they’re some of the best ways to avoid the coming theft.

If there was ever a policy manual on how to deal with recession, the Fed and ECB’s copies have fallen out of the ugly tree and managed to hit every single branch on the way down.

Indeed, if the world’s central bankers had wanted to perpetuate this recession until hell froze over, they couldn’t have done a better job:

• Set interest rates to levels flatter than ten-day old beer? Check.
• Stimulate consumption? Check. At the expense of savers? Check.
• Push stock markets to all-time nominal highs at shaky valuations? Check.
• Prevent widespread liquidation of financial assets? Check.
• Keep lending money to shaky businesses? Check.
• Keep that QE liquor flowing to ensure that banks never have to face their hangover whilst sober ? Check.
• Ensure that bad banks– and let’s face it, they’re all bad– gorge on lousy government debt instead of lending to small and medium sized businesses? Check.
• Keep on inflating base money? Check.
• Interfere with the market to ensure that bad assets never reach a clearing price? Check.
• Inflate retail prices? Check.
• Seize funds directly from savers’ accounts? Check.

Ludwig von Mises comes to mind– “There is no means of avoiding the final collapse of a boom brought about by credit expansion…“ Yet they keep trying to avoid it.

All in all, on this dismal list of failures there are more checks than at a Czech chess festival.

The only question is whether they stop the boom, or kill the currency. The way these central planners are behaving, we might even get both. So, enjoy the party, but dance very near the door. And load up on gold.

As you no doubt have heard by now, the government of Cyprus announced Saturday morning (when the banks were closed) that they would impose a ‘levy’ on bank deposits.

Originally they announced levies of 9.9% for accounts above 100,000 euros, and 6.7% for accounts below 100,000 euros.

In the face of such a massive backlash, they’re now talking about increasing the levy on larger deposits to 12.5%, and reducing the levy on smaller deposits to 3%.

A final vote on the measure won’t come until later this week. But they have imposed a mandatory ‘bank holiday’ this week to prevent people from withdrawing their savings.

And, according to the draft legislation, anyone who doesn’t hand over the money will be thrown in jail.

Now if this doesn’t prove the point of what we’ve been talking about for so long, I don’t know what will.

Cyprus is totally broke. And as we have discussed, bankrupt, insolvent governments have a very, very limited playbook that almost unilaterally involves stealing from their own citizens.

Bankrupt governments can, and do, steal from people. Pensions funds. Private property. And yes, even bank accounts.

This has happened so many times before throughout history; just over a decade ago in Argentina, for example, the government was in the middle of a debt and currency crisis. They shuttered bank accounts and completely vanquished the savings of their citizens.

Here’s my advice, plain and simple: do not hold the preponderance of your assets in insolvent, bankrupt nations. This includes the United States, Japan, and most of Europe.

Rather, move at least a portion of your assets to stable, independent countries. These are the same places that we routinely discuss in this column– Hong Kong, Singapore, Chile, Norway.

An Argentine friend of mine is staying down here at the farm with me, and this morning over breakfast I informed him this morning about what happened in Cyprus.

“Duh,” he responded. “What did they think would happen…?”

It just goes to show, there are two types of people– (1) Those who know that these things happen, and (2) those who refuse to believe that these things can happen.

One group will be able to protect what they have. The other will become victims.

Which one are you?

Earlier in the week, I wrote to you about an Argentine car rental agency that had started accepting Bitcoins as a means to bypass local capital controls.

We received a lot of questions about the article, the most common of which was “What in the world is a BITCOIN?”

Let’s start by looking at our current monetary system.

In most countries, a small tiny banking elite exercises total control over that nation’s money supply. And we’re just supposed to trust them to be good guys.

Yet central bankers around the world have conjured trillions of dollars out of thin air, debasing the money’s value. It’s a concept any six-year old can understand. If money grew on trees, it wouldn’t be worth very much.

This is one of the key reasons why people buy gold. You can’t just conjure gold out of thin air. It takes years of exploration and investment to pull it out of the ground.

In the information age, though, we have an alternative.

Bitcoin is digital currency. It doesn’t actually exist in our physical world… only in computers.

If this sounds esoteric and far-fetched, it’s not. The vast majority of our monetary system today is already digital.

A very small percentage of all the currency circulating in the world exists in physical notes and bills. The rest of it is merely accounting entries in bank databases. Most financial transactions are just a reshuffling of these database entries. Physical currency seldom changes hands.

Bitcoin is similar in this respect… nothing physical exists. But there are some key advantages.

For one, Bitcoin is not controlled by any government or central bank. And two, it’s private.

In the world of conventional finance, governments can see every time you use your credit card, withdraw cash at an ATM, or make a wire transfer.

Yet with Bitcoin, they don’t have this ability. And this is a key reason why Bitcoin has become so popular, especially in places like Argentina where people are getting squashed by their government.

A few days ago I wrote about an Argentine car rental agency that had begun accepting Bitcoins. My friend Sir Charles of PricedinGold.com was at their office; he snapped a photo and sent me some really great information.

The 1-day rental rate for a basic car was 380 Argentine pesos. At the government’s official rate, that works out to be $74 USD. In Bitcoins, the same car rents for 1.13 BTC… which is approximately $54 USD. This is nearly 30% cheaper!

The benefit for the rental agency is the privacy; they can avoid all the costly fees, bureaucracy, and debilitating capital controls associated with a normal transaction. Plus, they can hold Bitcoins instead of the rapidly depreciating Argentine peso.

If you think that these sorts of tactics– mind-numbing financial bureaucracy, confiscatory taxes, and capital controls– can’t happen where you live, think again.

I was just having a conversation this morning on the topic with Jim Rickards, author of the best-selling Currency Wars and one of the speakers at our upcoming Offshore Tactics Workshop.

Jim reminded me that, aside from Roosevelt confiscating gold back in the 1930s, the US government also imposed a confiscatory windfall profits tax on oil gains back in the 1970s. In addition, for most of the 20th century, capital controls were the rule around the world, not the exception.

To be fair, Bitcoin is not without its challenges. But the prospect of digital currencies presents an elegant alternative to fiat destruction.

If you want to find out more about Bitcoin, this website provides a lot of great introductory information:

Five-year plans in the Land of the Free? Apparently it’s not that far off from reality.

Yesterday Senator Tom Harkin introduced S. 544, “a bill to require the President to develop a comprehensive national manufacturing strategy.”

In effect, Senator Harkin wants the President to centrally plan the economy. Never mind that the President has zero experience in business or manufacturing. But hey, this worked out so well for Stalinist Russia, it’s no wonder Mr. Harkin wants to copy that model.

Not to be outdone by Mr. Harkin’s long-sighted vision, President Obama is drawing up plans to turn over Americans’ financial data to the nation’s spy agencies. So now, on top of everyone else, law-abiding citizens in the Land of the Free can count on the CIA and NSA combing through their bank statements.

Of course, it’s all for your protection against men in caves who wish to do you harm.

This is the same reason they irradiate and/or sexually assault airline passengers. It’s why they have to be able to assassinate Americans on US soil by remote control plane. It’s why they’ve authorized military detention of US citizens. Etc.

When you step back and look at the big picture, it really makes one wonder– how big of a piano needs to be dropped on people’s heads before they notice what’s happening..?

I acknowledge that people have roots. I understand that folks can’t easily pick up and leave their jobs, friends, and family. I understand there’s a lot of inertia involved.

But if you see the writing on the wall, there’s so much you can do to protect yourself against this lunacy. Own precious metals, preferably stored overseas. Open a foreign bank account. Ship your retirement savings abroad. Travel a little bit. Know, in advance, where you would go if you finally hit your breaking point and needed to leave the country.

The trend is clear. Every single day the political elite gives us even more evidence that they’re working overtime to destroy the economy and what few remaining civil liberties still exist.

It’s a difficult truth to acknowledge given that most people have been brainwashed from a very early age in public schools to trust in their government. But placing any amount of confidence in this system utter folly. And dangerous.

There’s no need to panic; rather, it’s important to take measured, rational action. The above recommendations are not alarmist, they’re steps that make sense no matter what happens.

In almost any scenario, you won’t be worse off for having gold and silver stashed away overseas. You won’t be worse off for traveling abroad and finding a nice place you enjoy. You won’t be worse off for taking back control of your retirement savings.

Yet it the bottom falls out, you’ll be one of the few people left standing. Unless, of course, you’d rather wait for the next five-year plan to kick in.

Several hundred miles east of Kinshasa in the Democratic Republic of Congo, the mighty Kasai river forms the boundary between two little known tribes of central Africa– the Bushong and the Lele.

Ostensibly there should be scant difference between the two; they’re separated only by a river, and they share a common language, art, and ancestry.

Yet their economic differences between are vast. As anthropologist Mary Douglas put it, “The Lele are poor, while the Bushong are rich… Everything that the Lele have or can do, the Bushong have more and can do better.”

We’ve seen these differences before– East vs West Germany. North vs. South Korea. Similar people, different ideals. On one side, economic freedom flourishes. On the other, it’s central planning and totalitarian control.

South America is becoming a similar case study, with the Andes forming a sort of “Golden Curtain” separating two clear sides.

On this side, the Chilean economy is thriving. The peso is strong. Corruption is low. Economic freedom is high. And their standard of living is rising.

On the other side of the Andes, President Cristina Fernandez has a stranglehold over what’s left of the Argentine economy. Inflation is rampant, corruption is incorrigible, and freedom is waning.

We’ve talked about this before; a month ago, I was in Buenos Aires on the day that Fernandez announced a ban on coupon-style advertising, just days after she imposed a price freeze at grocery stores around the country.

Price controls, media controls… they’re all part of the same tired playbook that morally bankrupt politicians in financially bankrupt countries have routinely fallen back on for centuries.

Fernandez’s most insidious move has been to FORCE Argentines to hold the rapidly depreciating Argentine peso. She has restricted her people from changing pesos into other currencies, including gold, as well as created obstacles to move funds abroad.

Many Argentines have reached their breaking points and are doing something about it. We’re seeing this first hand by the steady stream of Argentine citizens lining up at the immigration office in Santiago seeking residency.

My friend Sir Charles at PricedinGold.com wrote me this morning from Argentina’s Salta province (near Doug Casey’s lovely property in Cafayate) and told me that TEA Turismo, a local tour operator and rental car agency there has started accepting BITCOINS.

If you’re not familiar, bitcoins are digital currency units that are not controlled by any government. Bitcoins can be exchanged for goods, services, and other currencies, privately and anonymously.

For obvious reasons, Bitcoins are becoming increasingly popular in Argentina as people seek any means necessary to survive the economic destruction.

Needless to say, it would have been a hell of a lot easier to take these steps BEFORE it all hit the fan… not after.

This is an important lesson for the rest of us. There are consequences to printing money with wanton abandon. There are consequences to reaching an unsustainable debt situation. And, when the writing is on the wall, there are consequences when you delay taking action to protect yourself.

Diversifying income, assets, and personal interests abroad is a critical aspect of this. International diversification is something that the wealthy have been doing for centuries. But with so much modern technology at our disposal, these options are now available to ANYONE.

At least, while the window of opportunity is still open.

There is no such thing as a ‘good’ fiat currency.

Any model in which a tiny banking elite wields dictatorial control over a nation’s unbacked paper money supply is deeply flawed. The concept itself is dangerous, and comparing fiat currencies is like debating which is the ‘least harmful’ poison.

That being said, the world is not yet at a stage where you can walk into a Starbucks and pay for a few lattes with a quarter ounce of silver. Society still functions on paper currency, and if you want to engage in commerce, you have to pick one.

We’ve frequently mentioned several currencies in this column which are better options, i.e. ‘less ugly’, than the others.

The Hong Kong dollar is one example. It’s pegged to the US dollar in a very narrow band, so you’re not taking any risk of it fluctuating. And if the world experiences a deflationary spiral, both the US dollar and Hong Kong dollar will surge… so you’ll be protected.

Yet if the US dollar continues its path to irrelevance, the Hong Kong authorities will likely re-adjust the peg, giving you an instant nominal appreciation.

The Singapore dollar is another option which have been steadily appreciating against other major currencies, backed by a strong economy and a government with zero net debt.

We’ve also talked about the Chilean peso. Like Singapore, Chile has a booming economy with minimal net debt. And the peso has been one of the best performing currencies in the world.

But what most people don’t know is that there’s another ‘currency’ in Chile. It’s called Unidad de Fomento, or UF.

To be clear, UF isn’t an actual currency. There are no UF bills and coins. But you can open a savings account here denominated in UF, and it’s freely interchangeable to pesos.

Why would someone do this? Because UF is a store of value. It constantly adjusts with inflation.

In other words, one UF today will buy you as many loaves of bread and gallons of gasoline that it bought five, ten, fifteen years ago.

This way, you can ensure that the purchasing power of your savings is preserved. And if you have a UF bank account, you can even generate an inflation-adjusted return on top of that.

This is a really innovative idea born from Chile’s own experience with hyperinflation several decades ago. And as I have traveled to over 100 countries, I have seen this concept in very, very few places.

Of course, few banks in the world outside of Chile offer Chilean peso or UF-denominated accounts; and establishing a bank account in Chile is incredibly difficult.

Like many things in this country, banking is very relationship-based. I liken the Chilean banking system to a private club. It’s closed to outsiders, and it’s very difficult to gain entry. But once you’re in, you’re in… especially if you have a great relationship with your account executive.

It’s a pretty sad state of affairs in the Land of the Free when they have to pass a law making it illegal for the government to assassinate its own citizens.

Yet that’s exactly what’s happening.

Late last week, US Senator Ted Cruz introduced Senate bill S.505, “A bill to prohibit the use of drones to kill citizens of the United States within the United States.”

More than likely, this bill isn’t going to go anywhere. It’ll get shuffled around to various committees and be largely forgotten. But the fact that it was introduced shows just how far things have fallen in the US.

Again, do they really have to create a law to prevent the government from killing its own people?

Curiously, it’s interesting that this particular legislation stops at outlawing the assassination of US citizens on US soil… as if the Griswolds on their European vacation are acceptable targets…

Or that the bill specifically prohibits using drones to kill US citizens… but nothing else.

This is really amazing. But it’s just the tip of the iceberg.

Also last week, for example, Senator Dianne Feinstein from California introduced S.482, a bill “to provide protections for consumers against excessive, unjustified, or unfairly discriminatory increases in premium rates.”

This sounds mysteriously like a form of price controls.

Then there was H.R. 307, the Pandemic and All-Hazards Preparedness Reauthorization Act of 2013. This 37-page bill awards the government with all sorts of additional powers in the event of what they deem to be a ‘public health emergency.’

This includes quite a number of Big Brother tactics like national vaccine tracking and initiating BIOSURVEILLANCE operations.

Then there was H.R. 951, a bill “to promote the economic self-sufficiency of low-income women through their increased participation in high-wage, high-demand occupations where they currently represent 25 percent or less of the workforce.”

This is a quota system, plain and simple… using government funds to induce private companies to hire from a particular demographic pool.

So, in just a week’s time, the political elite in the Land of the Free gave us bills which:

1. ensure the government cannot assassinate its own citizens with drones
2. impose price controls with insurance premiums
3. award the government with more power to initiate biosurveillance operations
4. create a quota system in the labor market

It really makes me wonder… how much more will it take for people to notice how rapidly they’re losing freedom, or how destructive the political leadership is?

The Dow Jones Industrial Average, one of the key benchmarks of the US stock market, has soundly surpassed its all-time high. And most of the investing world is toasting their collective success and celebrating the recovery.

It’s a funny thing, really. Most investors only think in terms of ‘nominal’ numbers, i.e. Dow 14,000+ is 40% higher than Dow 10,000 (back in November 2009). But few think in terms of ‘real’ numbers… inflation-adjusted averages.

Everyone knows that inflation exists. We can all look back on prices from the past and realize instantly how much more expensive things have become. Conversely, though, most people don’t think about the stock market like this.

The reality is, though, that when you adjust for inflation, the Dow is well below its highs from over a decade ago.

I thought I’d put this into a bit of perspective.

Take beef, for example. Based on USDA retail price data, today the Dow will buy you 3,332 pounds of beef in the supermarket. This sounds like a lot. But it’s actually about 20% less than the 4,046 pounds of beef the Dow would buy back in December 1999.

And if beef’s not your thing, let’s look at fruit. Based on the wholesale price of bananas, the Dow currently buys you a whopping 15.35 tons of the tropical fruit.

But this is exactly the same amount of bananas the Dow would buy back in February 2008, when the Dow was just 12,266. And it’s a massive 60% drop from June 1999 when the Dow bought 38.51 tons of bananas.

Gasoline is an even more interesting example. Today, the Dow will buy roughly 3,812 gallons of unleaded, non-premium gasoline in the United States. This is almost exactly the same as last January, just fifteen months ago, when the Dow was only 12,633.

But to match its high of 10,718 gallons set in March 1999, the Dow would need to almost triple from where it’s at today.

Look, there’s nothing wrong with investing in great companies. But it’s important to recognize that the ‘buy and hold’ strategy espoused by the vast majority of financial advisors has been a serial loser for the last 10-15 years.

Given that you can’t eat or fuel up your car with stock certificates, it’s important to remember that we all live in an inflation-adjusted world. And that there are serious, serious consequences to out of control money printing by central banks.

Anyone who doesn’t understand this system need only refer to the rules of the popular board game ‘Monopoly’:

“The Bank never goes broke. If the Bank runs out of money, the Banker may issue as much as needed by writing on any ordinary paper.”

Have a great weekend.

Photo: Justus Blümer [CC-BY-2.0] via Wikimedia Commons

Over dinner with a friend in Busan, South Korea yesterday, the conversation turned to residency and second citizenships. My friend is a successful entrepreneur who’s lived in South Korea ever since I first met him in 1996.

Right now, he has an investors’ visa. The requirements are simple; when he got his, an investment of KRW50 million (about US$46,000) was enough to qualify.

But due to a rise in popularity, and some applicants not playing by the spirit of the law, the South Korean government will soon be raising the threshold. They are also scrutinizing such visa holders much more closely when it comes to things such as taxes.

So my friend, who is originally from Canada, has thought about taking out Korean citizenship.

Back when I first lived here twenty years ago, this was practically unheard of. There was one German fellow who appeared on Korean TV who’d done it. But it was difficult. And it offered few real advantages.

How things change. Today, South Korea is among the world’s strongest economies. And any able-bodied person who puts in the time and efforts can easily get it here. And, a South Korean passport is a fantastic travel document.

Today Korean citizens enjoy visa-free travel or visa-waivers to 160 countries around the world. The list includes the USA, Canada, virtually all of Europe, Australia, New Zealand, and every country in Latin America except Belize.

By comparison, a Danish passport will get you into 169 different countries visa free (the most of any nationality), and for a US passport it’s 166.

If you’re serious about it, qualifying for a Korean passport is NOT that difficult. Generally, 5 years of official residency qualifies you to apply. But, if you have a Korean spouse, and have been married for at least 3 years, the residency requirement drops to as little as 1 year.

You will also need to demonstrate that you can support yourself financially by having a steady job or sufficient accumulated savings. And, you’ll need a –basic- knowledge of Korean language and culture.

For further information, check out the Korean government’s purpose built “e-Government” website for foreigners.

Until next time,

Tim Staermose, Chief Investment Strategist
Sovereign Man

Image: Kurykh (Own work) via Wikimedia Commons

In official testimony before Congress in December 1912, just three months before his death, J.P. Morgan stated quite plainly:

“[Credit] is not the money itself. Money is gold, and nothing else.”

(the quote is almost Shakespearean in its unrhymed iambic pentameter…)

Of course, this testimony came only 253 days before H.R. 7837, better known as the Federal Reserve Act, was introduced on the floor of Congress.

The Federal Reserve Act went on to become law and pave the way for the perpetual fraud of fiat currency which underpins our modern financial system.

And if unbacked paper currency isn’t bad enough, we award dictatorial control of the money supply to a tiny handful of people, and then simply trust them to be good guys.

Between the four of them, Masaakai Shirakawa (Bank of Japan), Mario Draghi (European Central Bank), Mervyn King (Bank of England), and Benjamin Shalom Bernanke (US Federal Reserve) control an astounding $8.85 trillion.

And given the speed with which they are printing currency and expanding credit, it’s a number that’s only going to increase.

Morgan was right. Credit is not money. The word credit comes from the Latin ‘credere’, which means ‘to believe or trust.’

And when it comes to maintaining the purchasing power of their currencies, these guys have an absolutely stellar long-term track record, completely unblemished by success. In short, they have given us no reason to trust them.

Owning gold is the same as voting against this system, turning your paper currency into something that they cannot inflate or conjure out of thin air.

Yet there’s one problem.

While the world’s central bankers have given us absolutely no reason to trust them, our governments have given us every reason to NOT trust them.

Governments, especially the bankrupt insolvent ones, have a long history of theft, deceit, and plunder. As we have discussed so many times before, confiscation and/or criminalization of gold is not exactly a zero-risk prospect.

So while it’s critical to own gold, it’s equally important to store it abroad in a safe, stable jurisdiction outside of your home country.

One option if you have the means is to fly overseas and personally deposit your gold in a private, secure storage facility like Das Safe in Vienna or Cisco Certis in Singapore.

In general, it is perfectly legitimate to travel with precious metals. If you’re entering, leaving, or transiting through the US, be sure to file FinCEN form 105 if the FACE VALUE of your gold exceeds $10,000.

For example, as a US 1-ounce gold Eagle has a face value of $50, you would need to file the form if you’re carrying more than 200 Eagles (not including any additional cash/currency you happen to be carrying).

Canada, the UK, and continental Europe have similar rules in their own currencies.

If you don’t want to carry gold, both Singapore and Austria are full of options to purchase bullion, tax-free. In Austria, most banks sell Austrian Philharmonic coins– a 24 karat coin struck in 999.9 fineness that’s recognized around the world.

In Singapore, it’s also easy to buy gold at many banks, particularly the main branch of UOB downtown. Or if you prefer, you can stop in Hong Kong along the way and buy your gold there– Hong Kong banks consistently have ultra-low gold premiums.

A private box at Das Safe in Vienna starts at 360 euros per year (about $470). At Cisco Certis in Singapore, it’s much more cost effective at S$149 annually (about $120).

It’s also worth mentioning that if you are a US taxpayer, foreign safety deposit boxes where you have ultimate custody of your metal are currently non-reportable to Uncle Sam.

So not only can you make a giant vote against the financial system, you can also regain some privacy.

Throughout history, bankrupt governments in decline almost ALWAYS fall back on a time-tested playbook.

This includes imposing controls on EVERYTHING– wage and price controls, trade controls, capital controls, border controls, people controls. Everything. And this idea goes back to the dawn of human civilization.

The Third Dynasty of Ur in ancient Mesopotamia, for example, built a very early version of a commodities future exchange. People would commit to terms of trade on clay tablets for the future delivery of agricultural crops, then trade the tablets in a secondary market. It was genius.

But when the economy started to turn in earnest, the government set up a bizarre, complex, and increasingly bureaucratic system of regulating such trade and collecting taxes from it. They even started rationing resources and regulating irrigation.

It was debilitating. The market could no longer function, and the society soon collapsed.

Later, in the 4th century AD, Roman Emperor Diocletian infamously failed to control runaway inflation by fixing the prices of everything from labor to food to articles of clothing.

In the 1790s, the post-Revolution French government tried the same trick whilst inflating away their new paper currency. French farmers could no longer grow their crops profitably, and the 1793 ‘Law on Maximum’ created severe shortages of staple foods in the country.

In our modern times, Argentina has become the poster child for these tactics; the government has fixed prices at the grocery stores, banned advertising, prevented people from holding precious metals and foreign currency, nationalized pensions, and restricted beef exports.

Needless to say, these policies have been a complete disaster for the country. But as the rest of the world looks on, people in ‘rich’ countries foolishly believe that ‘it can’t happen here.’

This is wishful, ignorant, dangerous thinking. It can happen. It is already happening.

Just in the past week in the Land of the Free, for example, two pieces of legislation have been quietly introduced.

One, S.435, is an appalling bill that proposes to BAN the exportation of crude oil or refined petroleum products that originate in the United States.

The second bill would follow the European model and introduce a financial transactions tax (FTT) in the US. Like all taxes, they start with a small sum (0.03% in this case). And, like all taxes, we can be certain that this one would rise as well.

The FTT would apply to nearly all financial instruments– stocks, bonds, options, derivative contracts, etc. Everything except, of course, US government debt purchased directly from the Treasury.

To be clear, neither of these is law yet. But both give a very clear idea of how far the political elite is willing to go.

So, again, if you think that gold criminalization, price controls, and IRA/pension confiscation could NEVER happen where you live, think again. The chances of something happening are clearly greater than zero… which begs the question: why take the risk?

If you diversify internationally– establish a foreign bank account, form a Global Self-Directed IRA, store gold overseas, etc.– you substantially mitigate these risks. And no matter what scenario plays out, you won’t be worse off for having done these things.