January 7, 2010
Reporting from: Estepona, Spain
I’ve long believed that exchange controls will eventually return to the developed world, specifically in the United States and Western Europe. Struggling to find buyers of their debt, these governments will likely impose strict penalties for net outflows and retail currency transactions.
Unfortunately, most people will be too broke, too stupid, or too distracted to care that their savings are trapped in a rapidly depreciating currency within a federalized, bankrupt financial system. You are clearly not one of these people or we wouldn’t be having this ongoing conversation.
Moving some money out of your home country now makes a lot of sense; if you keep all of your wealth within one country, particularly where you live or your business is based, you are completely exposed to exchange controls, tax confiscation, litigation, extortion, etc.
Opening a foreign bank account is certainly one approach; we have talked about that before and will continue to do so. But gold presents an interesting alternative because it effectively exists outside of the financial system.
When you hold cash, either in a bank or in token amounts of a few thousand dollars, transactions are reported to the government. Banks, brokers, real estate agents, car salesmen, etc. are essentially unpaid government agents, forced to report on their customers’ financial activities.
Turning paper currency into gold privatizes wealth; to most governments, gold is just personal property, like stamps, a wardrobe of tailored suits, or action figure collectibles.
Consequently, because most countries do not recognize gold as a monetary instrument (at least based on its market value), gold can be moved freely and privately across most borders.
Once overseas, it makes sense to store gold in a private vault facility that is not part of any financial system, nor required to conduct any reporting.
Best Safety Boxes in Panama is one such facility; there is also Singapore’s Cisco Certis; in Hong Kong, The Storage; and in Vienna, Das Safe. I’m in the process of updating a 2010 version of my “Moving and Storing Gold Overseas” free report to discuss these in more detail.
I will send it this newly updated report to all subscribers of my daily e-letter.
When you’re conducting your due diligence on a private storage facility, you obviously want to be comfortable with the security and reputation of the owners and management. More importantly, however, you should be comfortable with the jurisdiction.
Does the local government have a track record of seizing and confiscating private wealth? Is crime and corruption rampant? Are the police there to serve and protect, or to coerce and fleece? Do I have to pay customs duties when bringing in valuables?
These are important issues to think about, though having already investigated the aforementioned jurisdictions I am comfortable recommending all of them.
Another such issue you may want to consider is estate planning and continuity. Assume, for example, that you have a long-term lease in an overseas private storage facility that contains a considerable amount of physical metal… in the event of your untimely death, what happens to the box?
It’s an important question and varies by jurisdiction. In Panama, when an individual box holder dies, it will take a Panamanian court order to allow access to the beneficiaries or successors.
While corruption in Panama is clearly on the mend, I still wouldn’t want to petition a Panamanian judge for access to millions of dollars of gold locked in a vault. The bureaucracy alone would be mind-numbing.
One easy solution to this problem is to have a corporate account– establishing a Panamanian trust or corporation as the box-holder, the shares of which would automatically be granted to beneficiaries in the event of the principal shareholder’s death.
There are some potential tax reporting requirements if you own a Panamanian Corporation. Next week I plan on bringing in a widely respected tax attorney to give you all the details and discuss better strategies for using overseas corporations to your advantage.