I have a secret to share. For the last 43 years, I have been an educator—first traveling all over the world conducting training classes and now through the written word.
You've probably heard the adage: when the student is ready to learn, the teacher shall appear. The counterpoint to that line of thinking is that you can teach all day long, but it makes little difference if the other person does not want to learn. I agree for the most part, but that doesn't mean educators should sit around waiting for a magic teaching moment. A good educator knows it is his job to grab people's attention.
So here I sit at my computer, trying to find the magic words to motivate our readers to explore a subject that might be a little scary, but it's also the best avenue I know of to prevent our life savings from being wiped out in either a high inflationary or a deflationary market. OK, here goes: regular people like you and me should consider internationalizing some of our assets. I hope folks don't stop reading at the last sentence, thinking this does not apply to them.
There is something about the subject of internationalization that turns off a lot of people. I hear comments like: “I'm not leaving this country. My family is here.” Or “That's for ultra-rich people, drug dealers, and Tina Turner.” Or the one I find really frightening, “I'm keeping my money right here where it is safe and protected by the government.”
The Most Powerful Thug
I have quizzed many investors who have internationalized a portion of their financial assets, and there is one common line of thought among them. As a government grows, it needs to confiscate a larger portion of private wealth to support its bureaucracies. It also needs to reallocate private wealth to bribe voters and stay in power. It finds ways to “enhance revenue,” as opposed to shrinking its bloated bureaucracy. Hell, our government probably spends a few million tax dollars on a politically connected public relations firm to come up with euphemistic terms like that. Governments are parasites; they must siphon wealth from the producers to survive.
For a government to siphon off wealth efficiently, it must know where the wealth is, set up ways to take it, and have a strong enough police force to make sure citizens comply. The intention is to make it easier to pay up than go to jail. Even people with modest nest eggs are constantly looking for ways to legally protect their wealth. Lawyers love it, since it means citizens need a variety of trusts and complicated legal avenues for minimizing taxes. That's part of the game. As governments press on, the stakes escalate, taxes increase, and we have to escalate our efforts to protect ourselves.
Look to New Jersey or France—which recently passed “millionaire taxes” to facilitate going after the super-wealthy. A year later both governments found that the tax revenue they received from the ultra-wealthy had dropped even though they taxed at a much higher percentage of their earnings. What happened? The wealthy moved and took their money with them. Frankly, I'm amazed that the political class seemed so surprised. Instead of more tax dollars coming in, they ended up with fewer. The next move—look for additional ways to “enhance revenue.”
Thugs Steal Land
Have you heard of the term “eminent domain?” It means that the government has the legal right to confiscate your property for public use. For generations, it meant that if the government was building an airport or school, it could force a property owner to sell needed land to the government. Here in the United States, the Fifth Amendment limits the federal government's ability to exercise that right. Americans put up with eminent domain because most of us have never had to deal with it.
In 2005, the Supreme Court vastly expanded when eminent domain could be used. The Kelo decision allowed a Connecticut city to take private property and transfer it to another private owner as part of the city's comprehensive economic redevelopment plan. In short, the definition of “public use” is running wild. Just look to the suburban towns in Cook County, Illinois, where private citizens were forced to sell their old Archie Bunker-type houses to the government. Then the government re-sold them to a politically connected developer who built a large condominium complex. Why did they do that? If 20 houses are torn down and 100 condominiums are built in their place, the government increases its tax base and increases “revenue enhancement” by 400% or more. Is this really a public use, or government use?
Thugs Steal Gold
Additionally, the government has targeted specific assets to confiscate. President Roosevelt confiscated gold by executive order in 1933. When he issued the order, gold was $20/oz. in round numbers. He made it a criminal offense to own gold to “encourage” citizens to comply with the law and redeem their gold for paper money. The price of gold from the Treasury was then raised to $35/oz. Those people holding fresh cash from the government took a huge hit to their wealth virtually overnight. In effect, the US government legally stole wealth from the private sector with the stroke of Roosevelt's pen. It would be foolhardy to think something like that couldn't happen again.
A recent Casey Research special report on Obamacare makes it clear that seniors may be forced to go offshore for health care that we may be denied in the US. Should my wife Jo or I need a hip replacement or a heart procedure, I don't want any delays because I have to find a way to move money offshore to pay for the care. Better safe than sorry.
We can protect our nest egg by making it more difficult for a confiscatory government to steal it. The government makes more rules, and prudent investors have to look for ways to legally work around them and protect themselves. Offshore investing offers one of the best means to do just that.
Of course, the US government doesn't make it easy. Under the guise of the Patriot Act and the war on drugs, our government has instituted a series of forms demanding that US citizens report all of their foreign assets on a regular basis. In addition, it is escalating its demands on foreign banks to share data with it even though doing so may be in violation of the laws in the local country. Because of the hassle, a lot of foreign banks are getting rid of US clients. Bingo! That's exactly what our government wants them to do to us.
The federal government is frantically escalating its efforts to identify and locate all assets belonging to US citizens all over the world. If you don't supply the information, there are criminal penalties. It is watching—as Edward Snowden recently pointed out. And it also owns the police force—as Mr. Snowden quickly found out.
Prudent people who understand the game will take steps while they still can to legally move some of their assets out of their home country, just like the people of New Jersey and France have done. The government likes to label those who do so as “selfish tax evaders” and “cheats” to discourage us from protecting ourselves. Always comply with the law. Report and pay taxes on your income, but use every legal avenue to protect your nest egg, or you could lose it.
Added Benefits to Internationalization
Not all of the reasons for going international are defensive. Offshore investments not only offer good investment choices that are not available in the US, they can also provide a tremendous advantage for protecting against inflation. When the dollar inflates, its buying power drops in relation to other currencies. Inside my offshore Roth IRA, I have investments denominated in eight different foreign currencies. As the value of the dollar decreases—which it has for the last 100 years—owning assets denominated in a currency that is increasing in value can offset those effects.
I bought a stock on a foreign exchange that could have been bought here in the US. When I sold it for a nice gain, I realized that not only did I take a gain on the stock, I also had an additional profit due to the foreign currency increasing in value against the USD.
My goal today is to help our readers understand why a lot of investors, even with smaller portfolios, are looking outside the US to protect themselves and their nest eggs. Internationalizing some of our assets is a darn good insurance policy. How many get-togethers have we had where friends expressed concern about the government and the direction the country is going? The next step in the government chess game will be instituting capital controls, like Argentina has already done. That means the amount of money citizens can take out of the country will be tightly controlled by the government. If we wait until that happens, it will be too late.
While Jo and I have no plans to move out of the country—after all, our grandchildren are here—we think it's plain old common sense to hold some of our investments internationally. In addition to good investment opportunities, we just feel safer because we are better protected from inflation, deflation, or outright confiscation.
Frankly, I'm inclined to suggest that you do more, not less, to diversify where you hold your assets. The federal government is doing all it can against those of us who have worked hard and saved our whole lifetimes. Rising debt, currency devaluation, increased taxes, unfunded entitlement programs, and near-zero interest rates are punishing savers and forcing us to take on greater risk just to try to stay ahead.
If you want to learn more, we have published an inexpensive special report, Going Global. It is the best, most comprehensive report on internationalization I have ever read. Unlike most of the material on internationalization, which is written for ultra-wealthy investors (by someone who is trying to garner their business), this report is written for folks like you and me.