November 11, 2011
Las Vegas, Nevada
There’s a lot to cover today, so let’s dive into this week’s questions.
First, Charles asks, “Simon, when you write about international diversification, I appreciate that you have so much personal experience. Multiple passports, overseas business, foreign bank accounts, storing gold abroad, etc., you’ve actually done it all yourself. For newbies, which of these do you think is the most important?”
I think everyone ought to consider opening a foreign bank account and moving a portion of their savings there. This is the most important step, for four key reasons:
First, most western banks are sitting on hundreds of billions of dollars in losses to their asset portfolios, not only from the sub-prime debacle, but also from sovereign default issues.
Since 2008, there has really been no positive change in asset quality… and rather than update their balance sheets to reflect this grim reality, governments have simply authorized funny accounting tricks to hide the truth.
To put it bluntly, the bank which holds your money in the US or Europe is probably insolvent. And your government, which theoretically guarantees the deposit, is insolvent too.
Many foreign banking systems are much, much healthier. Singapore has never had a banking failure. Ever. Banks in the Middle East (such as Abu Dhabi Islamic Bank) are extremely well capitalized. Other foreign banks (like Capital Security Bank in the Cook Islands) hold their deposits in cash and don’t make loans.
These banks are much more secure stewards of your hard-earned savings.
Second, foreign banks typically make it easier to diversify your currency exposure. If you want to get out of the dollar or euro, for example, a single bank account in Hong Kong lets you diversify into over a dozen different options– Chinese renminbi, Singapore dollars, Aussie dollars, etc.
When I was in Mongolia a few weeks ago, I opened up a bank account there in the local currency (the tugrik). It’s been one of the best performing currencies in the world for the last few years, and what’s more, my account pays a whopping 13.5% interest just to hold cash. Not too shabby.
Third, foreign banks are often much more innovative. Banks in the west think they’re innovative when they launch a Facebook fan page. Asian banks let you hold gold bullion in your savings account… or buy into the next big IPO at an ATM machine.
Last, foreign banks are just that– foreign. They aren’t under the control of your federal, provincial, or local government… so when you get on the wrong column of some bureaucrat’s list, you can’t be frozen out of your account with a few mouse clicks.
Further, I’ve been on the record as saying that capital controls in the west are a foregone conclusion. They’re already here in one form or another, and it’s only going to get worse as the west slides into economic inevitability.
An established foreign bank accountis safe from the destructive effects of capital controls. It’s truly one of the safest things you can do with your money right now.
[Offshore banking is a regular topic in our monthly premium letter, Sovereign Man: Confidential. Try it out risk-free, and learn the secrets of international diversification from the comfort of your office or living room.]
Next, Peter asks, “Simon, I’ve followed your posts with great interest. I would love to ‘internationalize’ my lifestyle, but my wife is a little more reluctant. Are there any places in the world from your experiences that are easier places to transition for those of us coming from a western nation (Canada in my case)?”
Sure thing– the world is a big place and there are a lot of options out there. One of the easiest international transitions is a place like Singapore. It’s really, really fantastic for families– safe, civilized, supremely advanced.
The average standard of living in Singapore is much higher than in Canada, and immigration rules are quite transparent and simple to navigate. There are a lot of opportunities for professionals, skilled workers, investors, and entrepreneurs alike, and as English is an official language, the transition should be smooth.
Other places to consider include Chile, New Zealand, Bermuda, and Estonia… all countries with established immigration procedures and plenty of options to start a business or find work if your skills are in demand.
Last, Stacy asks, “Simon- welcome to the US! How long do you plan on staying here, and are there any plans for a meetup?”
Thanks ;) It was a bumpy arrival earlier this week, and I think I’ve managed to end up on some Homeland Security list for accidentally forgetting to declare a piece of fruit upon my arrival.
Anyhow, I’m here for about 2-weeks, leaving for Chile on the 22nd to take our resilient community into the next stage. Prior to that, I’ll be here in Vegas, Denver, and then Dallas visiting friends; I may try to schedule a meetup for SMC members if time permits, stay tuned for details.