Archive for the ‘Economy’ Category
Lord Monckton sees China prepping for final collapse of America
Obama has done it. He has brought America down. It only took him just over four years. The Republicans could have stopped him. They didn’t.
How did the nihilistic left succeed in destroying America? Simple. They learned just a little of the capitalism they hate, and they drove your nation into outright bankruptcy.
And here is what the GOP has to say about it: just about nothing.
The once-mighty United States is now the most indebted nation on Earth. In round numbers, here are just some of the vital statistics as the patient dies:
National debt: $17 trillion, or $50,000 per man, woman and child, or $150,000 per taxpayer. Annual federal deficit: $1 trillion. Medicare/Medicaid/Obama”care”: $1 trillion a year. Social Security: another $1 trillion a year. Defense: two-thirds of a trillion. Unemployment handouts: $2 billion per working day. Debt interest: $1 billion per working day. Federal pensions, ditto.
Now for the big numbers. Your government’s Social Security liability is as big as the national debt: $17 trillion. Its prescription drug liability is $22 trillion. Then there’s the Medicare liability of $86 trillion. Total unfunded liabilities of the U.S. government are $125 trillion.
Net assets for each U.S. citizen are $300,000. The net liability of the U.S. government, shared among its citizens, amounts to almost four times that: $1.1 million a head. And the government’s debt is growing at $1 million every 45 seconds. To cover its annual deficit, it is printing $1 trillion a year of currency that is not backed by any asset whatsoever.
Here is what will happen next. When the crash comes, don’t say you weren’t given fair and clear warning.
First, the dollar will cease – no, make that “is already ceasing” – to be the world’s reserve currency. China, as I have been warning you she would, has realized the dollar is finished. So she is quietly making startling progress with bilateral and multilateral deals to replace the dollar with the yuan as the world’s currency of choice.
Sterling, once the world’s reserve currency, went precisely the same way in 1967 under orders from Moscow, which then largely controlled the governing Socialist Labor party in Britain.
After the Second World War, the Socialist/Communist governments of Attlee and Wilson bankrupted Britain with health-care and welfare programs and nationalization of industries. Inflation rose to 27 percent.
Obama’s copycat policies are different in only one respect. Moscow is no longer calling the shots. International totalitarianism no longer needs direction. Its cruel, hate-filled, destructive mission now advances on autopilot.
Watch some of the straws in the wind. China and Korea have come to a little-noticed agreement that international trade between them will no longer be denominated in U.S. dollars, but in yuan, or Won.
Behind the closed mahogany doors of the world’s finance houses, elaborate and secret preparations are being made for the upheaval and international financial collapse that will follow the deliberate printing-out and consequent implosion of the dollar.
Your GOP representatives should be, but are not, asking the administration to reveal to them the ever-tougher terms on which the Chinese continue – with ever-greater reluctance –to lend money to keep their communist ally in the White House afloat.
Do not believe China cannot afford to let her biggest creditor fail. She can, she will, and she is making careful preparations to do just that.
If you thought the crash of 2008 was bad, think again. The crash that is coming –I cannot put a date on it, but it is not far away now – will be orders of magnitude worse.
So, what should you do to protect yourself and your family? First, get rid of every dollar you have. Dollars are now all but worthless. When the crash comes, they will have no value at all.
In hard times, most financial instruments – currencies, stocks, bonds – are not worth the paper they are printed on. Get rid of them now. Buy silver coins. They will quintuple in price once the crash sets in, and they are small enough to be fungible when the dollar dies.
Buy land, some of it well-wooded, some of it arable, some of it grassland. You will need the timber to power your steam tractor. Gasoline will be a costly rarity. And make sure you can defend yourselves. Starving mobs are no respecters of persons. Do what the Mormons do: Get three months’ supply of imperishable foodstuffs and hide them in the basement.
Absurd though this advice may now seem, there is a real danger that the crash will sudden. If so – perhaps for several months, and even for years – the fabric of civilization, including the food-supply chain, will fail.
It is not my custom to write in millenarian or apocalyptic terms. But the very best that can be said for your current administration is that it simply has no idea what damage it is doing. It is printing money in the vain hope of buying itself time. Yet every fake dollar that comes off the printing-presses makes the problem worse and the solution harder.
At worst, what is now happening to your nation may be deliberate. In that event, your current “president” will go down as history’s greatest villain. In any event, he will go down as history’s greatest incompetent.
Do not believe none of this can happen. Psychiatrists study what they call “normalcy bias.” People expect that everything will carry on and that America is too big to fail. She is not. She has failed. You will pay a heavy price for her failure, unless you act now to defend yourselves against what your government, with the culpable, silent acquiescence of the GOP, is doing to destroy your nation.
Finally, pray. God bless America. It has been nice knowing you. Only when you are gone will the world realize how much it misses you, and – paradoxically – how much it owes you.
Read more at http://www.wnd.com/2013/05/the-dollar-and-the-usa-is-toast/#MZjqFZzvdls1skvk.99
Energy companies are lining up for their shot to drill in the Dakotas and Montana after a new government report revealed that a massive geological formation stretching across the states contains twice the oil and three times the amount of natural gas than was originally believed.
While the new estimate is drawing smaller companies to the game, the larger players like Schlumberger, Halliburton and Continental Resources are pushing forward with ambitious multi-year plans to stake their claim in the industry.
Continental recently announced a five-year plan to triple its production by 2017. The company’s growth is based on success in North Dakota and Montana as well as in parts of Oklahoma.
The dash to drill follows news from the government on how much more oil and natural gas there is to tap.
“These world-class formations contain even more energy resource potential than previously understood, which is important information as we continue to reduce our nation’s dependence on foreign sources of oil,” newly confirmed Interior Secretary Sally Jewell said Tuesday in a statement.
The new U.S. Geological Survey estimates there are 7.4 billion barrels of oil, 6.7 trillion cubic feet of natural gas and 0.53 billion barrels of natural gas liquids in the Bakken and Three Forks Formations in the Williston Basin Province of Montana, North Dakota and South Dakota.
Since 2008, close to 450 million barrels of oil have been produced in the area and if the government estimates are correct, that leaves billions of barrels of oil and trillions more cubic feet of natural gas left for the taking.
That’s good news for North Dakota — a state that’s already reaped big benefits from the oil boom and has one of the strongest state economies in the country coupled with an exceptionally low unemployment rate. Tax revenues from natural gas and oil hit $1 billion last year in North Dakota and the state is on track to double that number next year.
Republican Sen. John Hoeven believes numbers from the new USGS survey will draw even more developers to the area.
“This will mean a lot of jobs,” he told FoxNews.com. “Financially we are already very strong, we have no debt, but this will mean a lot more. Stores, restaurants, movie theaters – we’ll have to build and we’ll have to hire workers.”
The competition to court employees is already on at the McDonalds in Dickinson, N.D. where prospective hires are being lured in with $300 signing bonuses, Hoeven said.
Calls to McDonalds Corp. for comment were not immediately returned.
Some environmental experts like John Harju, associate director for research with the Energy and Environmental Research Center at the University of North Dakota, believe the possibilities are even greater than what the government forecasts.
“Like any of these USGS estimates, think of them as a milemarker that’s well behind you in the rearview mirror,” he told the Grand Forks Herald in North Dakota.
Still, not everyone is as gung-ho as Hoeven about drilling for natural gas, and the controversial process known as fracking used to access it.
The government hopes to calm some opposition to natural gas by releasing a set of draft rules to regulate hydraulic fracturing, or fracking. The process involves injecting a high-pressure mix of water, sand and chemicals deep into rock formations to release trapped oil and gas.
Supporters say the drilling method should continue and is credited for the country’s domestic energy boom. They say fracking gives the country a chance to cut its dependence on foreign oil.
Environmental groups have long objected to the practice and say it pollutes the groundwater and kills crops and livestock. They also argue that fracking releases heat-trapping methane gas into the air.
But in mid-April, the Environmental Protection Agency dramatically lowered its estimate of how much methane leaks during natural gas production. The agency said that tighter pollution controls put in place by the industry from 1990 to 2010 cut the country’s average of methane emissions by more than 850 million metric tons overall, or about 41.6 million metric tons annually. That’s a 20 percent decrease from previous EPA estimates – a decrease that took place as natural gas production in the country grew by nearly 40 percent in the past two decades.
It is not clear exactly when the government will release its fracking regulations, but it is expected in the next few weeks.
Read more: http://www.foxnews.com/politics/2013/05/02/energy-companies-line-up-to-drill-after-government-survey-says-there-more-oil/#ixzz2SEJHiyhm
Hundreds of hourly employees of fast food restaurants and clothing shops, radicalized by the Workers Organizing Committee of Chicago, walked off the job last week, to protest the fact that the minimum wage isn’t a “living wage,” to encourage further unionization, and especially, to do their day’s service to the Democratic Party that keeps them in bondage.
This periodic saber-rattling of the American Left – about the alleged “need” to force other people to pay employees more than they think a job is worth – masquerades as a show of solidarity with the underpaid denizens of America’s lower class. But it’s malicious and destructive, as it warps the public understanding of the market, and it undermines a desperately-needed understanding of the right paths needed to reach the American Dream.
The Request and the Reality
The current minimum wage is $8.50 per hour. The cause of the moment is to nearly double it, to $15 per hour, though there’s also a lesser, and even more radical, national effort to nearly triple it, to $22 per hour. Why? Because the minimum wage is not a living wage – meaning that $8.50 per hour is not enough “to live on.”
This of course requires a further definition: what IS enough to live on? Honestly, that varies by location, age, and circumstance. Food, shelter, clothing, and other necessities of life have different price ranges for men than for women; they differ from city to country, from children to seniors. Do you support only yourself, or a family? Do you need to travel for work? Are you in an area with a high cost of living, or with high transportation costs?
If government is going to set a minimum, such a minimum should take such differences into account… but it can’t, of course. So the politicians set a random number, adjust it upwards a little bit every few years to account for some of our inflation, and leave the subject otherwise untouched. Most elected officials have at least some basic understanding of the damage that unaffordable increases in this floor would do to the economy, so they don’t meddle nearly as much in the USA as they do in some other countries. But it’s still too much.
There have been subminimum wages set – some jurisdictions have had a “teenager minimum” that only applies to high school kids living with their parents, and most have a special subminimum wage for hospitality workers who get tips, on the theory that the tips can’t be legislated but they shouldn’t be left out of the mix.
But there are larger questions. Who pays this wage? And what does the minimum wage mean to the person paying it? And what does this number represent to the person receiving it? It’s about a lot more than the funding of the necessities of life.
Who Pays the Minimum Wage?
Many types of companies have low-skilled, entry-level, or other low-salaried positions, all of which come under the scope of a minimum wage. Restaurants have busboys, waiters, bartenders, assistant cooks, as well as managers, head waiters, chefs and accountants. Manufacturing plants have janitors, assemblers, packers, and receptionists, as well as engineers, accountants, foremen, lawyers, salesmen, and buyers.
Each of these positions, while critical as a group to the company, has a different specific value. The more complex a business, the wider the range of employees there may be. Nobody but the company itself knows how easy or difficult it is to get the right people for each of these jobs, how important is their individual contribution, how capable they are, how indispensible.
In one area, great buyers may be a dime a dozen, while qualified engineers may be so rare that they command a huge salary. In another, it could be reversed; a city with a great engineering school may be flush with cheap engineers for hire, but have few good accountants or salesmen.
Each business sees these challenges and handles them, learning to establish appropriate pay ranges over the years, using the ease or difficulty of its own personnel practice to drive it. Companies get a reputation for a better or worse work environment, a better or worse career track, better or worse benefits, better or worse salaries. Adam Smith’s “Invisible Hand” applies here: even without legislation of any kind, a company will pay what the market will bear, if left alone to do so, because of competition; if it underpays good people, it will lose them, and it won’t stay successful for long.
As the minimum wage enters this process, it brings distortions, sometimes severe. The minimum wage doesn’t only affect the employees receiving it; it affects everyone else in the organization.
A fast food place might want to pay its cashiers and line workers $5 an hour, its line managers $14, its branch manager $25. But the government makes them pay $8.50 to those cashiers and line workers, then that leaves less in the pool for the better jobs; now the line managers may only get $10 or $11, though they deserve better, and the day and night branch managers $18, though they deserve far more. The more they provide in benefits, from 401K plans to healthcare and dental care, the less is available for the hourly wage. No matter what they pay their employees, they still have the same total pool of salary to distribute.
Every increase in the minimum wage therefore depresses other benefits, as well as the salaries to other non-minimum wage employees. Company-paid time off, healthcare, life insurance, company-subsidized cafeterias and fitness rooms – these are all valuable as well, to all employees, and every time we raise the mandated minimum wage, we force the employers to cut back on some of these benefits to everyone.
The Left is always calling for businesses to do more for their employees: longer maternity and family leave, more vacation time, onsite child care, marriage and family counseling, the list is endless, and many are indeed good ideas, when affordable. While these remain optional, the private sector can at least leave the matter to the Invisible Hand.
More successful businesses with good margins can afford to be more generous. Less successful businesses, or more accurately, good businesses in industries with tighter margins or greater competition, cannot.
But when the government starts mandating such benefits, it wreaks havoc on the economy.
To the company that could already afford to give three weeks of vacation to its employees, a three-week vacation mandate is no change, but to the very different business down the block, one that only gave two weeks before, we’ve now stuck them with a new 2% tax – on their gross, not on their net like income tax assessments – because they will now get one less week per year out of the 52 from their entire payroll.
Remember the many things government already forces companies to give their employees. Some are reasonable, like a guaranteed lunch break; others can be crippling burdens, like the 7.5% company match on Social Security and Medicare that we don’t even see on our paychecks, but which companies must pay on behalf of every employee based on his salary. You know how much they take from you for Social Security and Medicare? They actually take double that; the forms just don’t allow the company to show it on your pay stub, so most employees are completely unaware of it.
When conservative economists complain about the rotten deal that Social Security presents to the American retiree, socialist economists dismiss them by pointing out the apparently wonderful return on investment that the reported numbers provide. The socialists say that we usually get back much more than we put in… and they can do so only by conveniently leaving out the fact of this company match. In fact, you’ve put in double what the records show, because your employer would have had 7.5% more to pay you if it weren’t for this pernicious, hidden trick. But we digress.
The government mandates so many expenditures on behalf of their employees and customers… Washington mandates that many businesses add handicap-friendly parking spots, handicap-friendly doors and bathroom stalls, ramps to accompany staircases. All these are well-intentioned, but they place an expensive burden on many a business.
In the old days, the wheelchair-bound would gratefully give their business to those who thus invited them by making such accommodations voluntarily. This new mandate removes that reward for those who had accommodated them willingly, and raises the barrier to entry for all businesses, as construction and rental costs skyrocket to accommodate the ADA.
The minimum wage cannot be viewed in a vacuum; it’s just one part of an employment picture that gets more costly, more punitive, every year. One might ask, why should a company stay here in this environment; why not just pull up stakes and move to some more welcoming country, some country that doesn’t nickel-and-dime its employers into the poorhouse?
Well, if you look at the industries we have lost, and the country of origin statements on the products on store shelves, you may see that you’re not the first to ask… and that, in fact, many employers have already taken decisive action.
Depressing Employment: Punishing a Jobseeker with a Minimum Wage
Personally, when I think of the effects of a minimum wage, I find it best to use round numbers for simplicity and ask what a minimum wage will do.
Imagine a clothing store, like the Macy’s or Victoria’s Secret shops that saw employees walk out on Tuesday to participate in this protest. Or imagine you run a fast food place, like McDonald’s or Subway; they also had employees demonstrating for the Democratic Party’s latest picket.
You determine what you can afford to pay by your other operating costs, your sales volume, your profit/loss ratio. Say you can afford $20 per hour for staff – that could get you one employee at $20/hour, or two at $10/hour, or four at $5/hour. Or say you have a bigger place that needs more staff, and you can afford $100 per hour for staff – that could get you five at $20/hour, or ten at $10/hour, or twenty at $5/hour.
Each business has different staffing needs. But if a business has only $20 to spend on salary, he’ll go from five employees at $4/hour to four employees at $5/hour. If he has to raise their pay to $6/hour, another employee will have to be cut. If has to raise them to $10/hour, he’ll be down to just two employees. That may seem great for the two who remain, but not for those who had to be cut.
The difference of a dollar or two an hour, when multiplied by all the staff of a business, large or small, has an effect on the company’s service level. If a mandated wage hike requires a reduction in staff to fund it, the anger may be directed at the company, but it won’t be their fault. It’s the nanny state liberals who’ve put them out of business, by forcing an employer to cut employees he would never have cut on his own.
The Minimum Wage and You
But there’s another issue to consider when we talk about minimum-wage jobs, and it’s more important to the jobseeker than all the others. What is the job for?
Don’t jump to conclusions here. Some may say “all jobs are the same, they’re to make money.” But that’s not true.
Future teachers take entry level jobs as student-teachers or substitutes, hoping to break into the field so they can get a full-time job later. A low hourly salary, or even a free internship for college credit, may make the job worthwhile. Student teaching at the right school can provide experience worth far more than the paycheck, when it’s applied to the young teacher’s next application for a full-time gig.
Radio/TV/Film majors take internships that involve getting coffee for the director, photocopying scripts for the cast, knocking on the door of a star’s trailer to wake her up for shooting, running to the store to buy batteries for the microphone. The pay may be terrible, but it’s an entry-level job; it’s not meant to be permanent. The real purpose of the job is to learn the ropes of a business by being inside, rather than just studying it from outside as in college. You might be happy with an $8.50/hour gofer job at a basic cable station, but you might be even happier doing the same job for free at a major network, or on a film set, or the radio station that owns the afternoon drive timeslot in that market.
This isn’t to say that the money doesn’t matter, just that the money today may not matter. There’s so much more to an entry level job than the paycheck. The goal of an entry level job is to get into a career, then move up, out of the entry level, to begin climbing the rungs of a career ladder.
It’s the same thing in retail, in manufacturing, in distribution, in trucking. You may start as a cashier or packager or receptionist, but you’re not supposed to stay there. In retail, the goal is to be impressive as a cashier, so you can move up to line boss, assistant manager, manager. In restaurants, you may start as a busboy, but move up to head waiter, manager, bartender, catering sales, even chef. In an office, you may start out as a file clerk or assemblyman on the line, but soon move up to tactical buyer or customer service rep, then to salesman or product manager, then plant manager or divisional vice president.
This is no exaggeration; this is how it’s done, how it’s meant to be done. It’s certainly true that there are people who don’t move up that far, but if people want to, there’s no reason they can’t move up somewhat, out of the entry level and up to the midlevel.
Every employee at Chick-Fil-A or Wendy’s can’t rise to store manager; there aren’t that many such jobs to be filled. Every assembler on a production line can’t move up to become plant manager. But every employee can move up part of the way – to be a shift boss, an assistant manager, and then use that experience to go across the street and get into management somewhere else. All it takes is a mix of ambition, talent, and work. Almost nobody should stay in an entry-level job for long.
That’s where the money should be. Not in the entry level job, where it’s all about learning the ropes, getting a start, finding out whether this career is the right match or not. In our system, the better paychecks start showing up when you break out of that entry level and start applying what you’ve learned, in another job where you can be more valuable, and for which your employer can afford to pay you more.
The Self-Limiting Lie of the Living Wage
The nannies who wail about “the need for a living wage” do far more damage than they could ever imagine. As we’ve seen, by forcing employers to raise the pay of every employee, they are also forcing them to hire fewer employees. Rising minimum wages have always contributed to greater joblessness rates; it’s a mathematical certainty. In a time of unprecedented unemployment, the Democrats today want to increase unemployment levels even more with a minimum wage increase. How typical.
Also as we’ve seen, such meddling with the marketplace drives businesses out of America entirely. We’ve seen whole industries give up on the United States and move production to Mexico, to China, to India. We can’t blame them, but see what it does to those left behind: fewer opportunities for those people looking for an entry level job, looking for that first foot in the door of a career. And fewer opportunities for those who got that entry level job, and excelled in it, and are now looking for that first step up. A town with only five manufacturing plants only needs five plant managers. If there were ten plants, they’d need ten plant managers. If there were twenty… just imagine the opportunities that would abound if our governments weren’t driving business away every day as they do!
But most destructive of all is what this “living wage” hogwash does to the individual, in terms of his own ambition. This nation was built on ambition. We didn’t have a foundation of manufacturing plants, roads, cities, civilization… we came here from Europe in the 1600s and 1700s, with only ambition, a work ethic and a core of Western Civilization that inspired us to strive until we thrived. And it worked.
Everyone with an entry level job should be thinking every day of how to learn from it, excel at it, shine among his fellow employees… so that he or she can be noticed the next time there’s a promotion opportunity. Low entry level salaries encourage this drive.
People need to struggle at the bottom, so that they stay unsatisfied with their current lot in life. That’s what gives people the energy to go to night school, to work two jobs, to write a book in their spare time, to tinker in the workshop and invent things, to start a business in the garage that grows to become a conglomerate.
More than anything else, it is the difficult struggle at the bottom that has helped people improve themselves. Our society must never stop wanting the best for everyone, wanting to spur them forward to grow and improve their lots in life.
If a “living wage” is a tiny tenement apartment and cheap generic food, then no, I don’t want that for anyone, long term! I want the minimum wage to be a job held by a student living with his parents, a part time job held by a moonlighting person seeking to change careers. It should be a step to an exciting life in the American Dream, not some dreary acceptance of remaining on the bottom for one’s whole life.
Nobody is supposed to be a cashier his whole life, a file clerk his whole life, a drive-through fry cook his whole life. Our system is supposed to present opportunities so that everyone, from all walks of life, can rise up from that kind of beginning to gain a happier existence in an ever-expanding middle class or even the world of the wealthy.
And anything that hampers that kind of growth, either short term or long term, from too-high minimum wages to the many other crippling regulations of the modern nanny state, must be opposed, must be curtailed, so that the United States of America can return to its former position as the bright, shining City on a Hill, a beacon of opportunity that the world once respected and strove to emulate.
Copyright 2013 John F. Di Leo
John F. Di Leo started out as a file clerk as a boy, filling out government forms in a Chicago small business, proudly and happily earning subminimum wage. That low-paying but educational beginning set him on the career path to become a Customs broker and international trade compliance trainer for a worldwide conglomerate; the system worked for him, and it can, and should, work for everyone, if we don’t let the Left squash such ambition by the destruction of the American Way.
Permission is hereby granted to forward freely, provided it is uncut and the byline and IR URL are included. Follow John F. Di Leo on LinkedIn or Facebook, or on Twitter at @johnfdileo.
by Doug Casey
In a wide-ranging interview with Casey Research editor Louis James, Doug Casey discusses why it’s imperative to start diversifying one’s assets today, and provides some guidance in considering countries to diversify into.
L: Doug, we’re getting a lot of questions from readers on how to follow your advice to diversify assets politically. I know it’s a prickly subject, but what can you tell us about getting our money out from behind the new iron curtain that seems to be descending?
Doug: First – and I can’t stress this enough – you’ve got to accept the grim reality of impending currency controls. The modern era of foreign exchange controls really started with the perversely Orwellian-named Bank Secrecy Act of 1970. For the first time, that made it obligatory for US citizens to report any foreign bank or brokerage accounts they had to the government.
But the threat is older than that, of course, going back to 1933, when Roosevelt confiscated Americans’ gold. Interestingly enough, only gold bullion held by Americans within the United States was confiscated. If you had gold outside the United States, you were insulated.
L: I didn’t know that – if history repeats itself, that could be a key tactical factor for our readers to consider.
Doug: Yes. There are no guarantees, of course. Those in government today think they can do absolutely anything they deem necessary and expedient. But at least if it’s out of their physical bailiwick, it improves your odds.
L: Why do you think they allowed that exemption last time? I doubt it was because they had any shred of respect for private property – maybe they just recognized that trying to seize gold overseas would be impractical.
Doug: Good question. Well, the 1930s were a different era. Communication, for one thing, was vastly slower and more expensive than it is now. And you have to remember that though we had an income tax in the 1930s, since 1913 actually, very few people were paying it – even among those allegedly legally obligated to pay it. It was hard for the government to find out who they were, and how much they were earning, and so on. Even though there were only 140 million people in the country then, the absence of computers and much less centralization made it very hard for Washington to keep tabs on them.
L: The income tax really was a voluntary tax back then!
Doug: [Laughs] Much more so than now – it really was a different era. At any rate, based on this history and that the juggernaut is building momentum towards the bottom of the ditch, I have to reiterate my advice on the most important investment decision you can make. And it isn’t one among the different classes of investment; it’s political and geographical diversification. Simply put, that’s because no matter where you live, your government is the greatest threat to your wealth today.
If you’re a high-income earner, the state basically takes 50% of what you earn, and then from what’s left, you have to pay your real estate taxes, sales taxes, and many, many other kinds of taxes. Government is without question the biggest danger to your financial health. You’ve got to diversify your assets so they are not all under any one government’s control.
L: You say that in almost every speech you give these days, and you said it in one of our interviews a couple of weeks ago.
Doug: Yes, and it bears repeating, constantly. It’s the elephant in the room that very, very few people pay any attention to, and it’s going to stomp most people to death, for just that reason.
L: Okay, so give us a primer. For those who want to avoid getting crushed by the elephant, where do they begin?
Doug: To start with, it makes all the sense in the world to have a foreign bank account. Not a hidden one – I’m not advising anyone to break any laws. You report it on your annual tax filings. So, the government will know about it, but if it’s a foreign bank account, they can’t just step in and lock down your assets in an instant.
L: Does Canada count as a foreign country for Americans?
Doug: I’ll probably get hate mail for saying so, but it’s important for investors to recognize that Canada is a sort of “USA Light.” When Washington says, “Jump!,” Ottawa says, “How high?” Nonetheless, if only for the sake of formalities and legal pleasantries, US citizens would have some degree of insulation with a Canadian bank account. And, as a general rule, Canadian banks are more solvent than US banks, so setting up a Canadian bank account is an easy first step for many US investors.
The second thing to do would be to set up a Canadian brokerage account. Unfortunately, the SEC has made it so that no Canadian broker will open an account with an American unless they have a US subsidiary. That, in effect, makes your Canadian brokerage account like a US brokerage account. That doesn’t help you much from an asset-protection point of view, but it does let you trade directly in many of the stocks we recommend in the International Speculator and the Casey Energy Report (not through a US market-maker via the pink sheets).
Third, I think that having a safe deposit box in Canada is vastly preferable to having one in the US. You probably do remember that when Roosevelt confiscated gold in 1933, he also sealed safe deposit boxes in all US banks. No American could visit a safe deposit box for some time without a government agent accompanying him. That could certainly happen again.
And all of this is true in other countries around the world.
But yes, as an easy place to start, Canada is a sort of plain-vanilla jurisdiction that’s worth giving a try.
L: So, what would be the French vanilla, or even the Bailey’s Irish Cream jurisdiction? Is there such a thing as a tax haven anywhere in the world anymore? Even the Swiss have caved… I just heard that they just started handing over new account info to US authorities.
Doug: Yes, apparently there were some 50,000 accounts UBS had, owned by US citizens. UBS, a multinational bank with a very substantial presence in the United States – and therefore exposure to extortion by US authorities – was going to hand them all over. The Swiss government stepped in, saying they would prosecute UBS officials if they violated Swiss law by doing that. But the Swiss worked out some sort of compromise with the US authorities, so only about 5,000 accounts are being handed over. On what basis they picked these 5,000 is uncertain.
So, the first tax-haven rule is to never go to a place that’s obviously a tax haven. If I were interested in bank privacy, I’d forget about places like the Bahamas or the Caymans. It makes no sense at all today. All those little island republics are totally under the thumb of the US at this point. And they’ve always been infiltrated with stooges. They may have bank secrecy laws, but they don’t have a tradition of privacy like Switzerland has – although that’s no longer what it was.
You’ll recall how the German government bribed a Liechtenstein banker to steal account names and information. The Germans then turned over relevant data to the UK, US, and other governments, who were quite happy to receive stolen goods. And there was about zero protest over the appalling theft. It’s a testimony to how thoughtless and ethically complacent most people are; when a state commits a crime, they just overlook it.
L: Are you saying that all of the little havens are unreliable?
Doug: Well, I don’t know of any that are reliable.
Instead, I would recommend places that are geographically distant from the US – and culturally distant as well. To me, the best places to be are in the Orient. That’s partially because the Chinese and other Oriental civilizations are much less prone to roll over and do what they are told. National pride ensures that, if nothing else.
But if you go this route, with, say, an account in Hong Kong, you certainly would not want to use a bank like HSBC. It’s got branches all over the world, prominently in the US – so, like UBS, they’ll do what they are told.
Actually, there are still Swiss banks that will open an account for a “US person,” if you can convince them to do it. But you definitely do not want a Swiss or Liechtenstein bank that has any presence in the US. The same would be true in the Orient – so forget about HSBC. You want a real Chinese bank. That way, when the US government calls, the phone will be answered in Chinese and no one will speak English with them.
The best places are the least obvious places. Malaysia is interesting. Thailand. These are completely non-tax-haven types of places – and that might make them suitable.
L: What about step two, getting a brokerage account?
Doug: Well, it’s tough these days. If you want to trade in US and Canadian stocks, you pretty much have to have an American or Canadian broker. But one thing that can be done that is completely legal (and reportable) is to open up a foreign company. Then the company can open up a brokerage account. That way, you do have a level of insulation I think is very valuable, both from a practical and a legal point of view.
L: I gather you’re not talking about the banana republic IBCs I see peddled on the Internet?
Doug: Right. Most of what you see on the Internet offering to open up an IBC – which is just an offshore company – are just scams, if not stings. The fees are too high. The people are usually sleazy. They often come up with all sorts of cockamamie tax-avoidance schemes. You may be encouraged to do things that are illegal. They are just disasters waiting for you to walk into. I strongly encourage people not to even consider such offerings.
If you want an offshore company for the purpose of convenience or a measure of privacy, completely reportable and within the law, the best thing to do is to go to the jurisdiction you’ve picked and see a lawyer who deals in that sort of business. Cut out the middleman. Ideally, the jurisdiction would be one that meets the criteria I outlined above, but is also a place you’d actually enjoy spending time in.
L: So, you hop on a plane to, say, Panama, and… how do you go about finding a reliable attorney to set up your corporation?
Doug: That’s the intelligent way to do it. There’s nothing illegal, nor particularly tricky about it; you just find a lawyer who specializes in it, pay the fees, and off you go.
How do you find a good lawyer? Same way you do at home; you go and start interviewing lawyers until you find one that impresses you as being sound.
Panama, by the way, is probably the best place to do this at this moment. The British Virgin Islands may be another. And, of course, if you’re an Australian or a New Zealander, you should think about Vanuatu – it’s only a two-hour plane ride from Sydney or Auckland.
Back in the Western Hemisphere, the only other reasonable alternative I see is Uruguay. It’s always been promoted as the “Switzerland of South America” – and there’s a lot of truth to that. Uruguay is a small country, about the same size and with the same size population as Switzerland, and a very big part of its national income is foreign banking. It has no tax on foreign-earned income – though, unfortunately, it recently instituted a tax on domestic-earned income. Too bad.
Another unfortunate thing about Uruguay is that when you import gold there – such as by carrying Krugerrands in your briefcase – their customs form asks you to report it. It’s not against the law, but for some ridiculous reason, they want to know.
L: That’s really all it takes? Find a lawyer and pay the fees?
Doug: Yes, though there can be nuances worth paying attention to. For example, there are various jurisdictions with different tax treaties that can be used to your advantage. The Dutch Antilles being a famous example, as far as dividends treatment goes. This is a specialist area that, well, you should discuss with a specialist. But you should definitely give it some thought.
Oddly enough, you can import gold into Argentina with no problems nor reporting requirements, and you can buy and sell gold in Argentina just as easily. It’s much easier than in Uruguay, but I wouldn’t dream of doing any significant banking in Argentina – and neither do Argentines. The government is just completely untrustworthy when it comes to things like bank accounts.
So, it’s rather perverse; you can deal easily in gold in Argentina, but not bank accounts, and you can’t deal in gold easily in Uruguay, but bank accounts are easy.
Frankly, the best place to look for one-stop financial services shopping is Panama. Banking is easy, and there’s no gold reporting.
And yes, you can still take gold in and out of the US without reporting it. It’s like stamps or rare coins. The exception would be, if you had enough of them, to remember that Double Eagles have a face value of $20, and the new Eagles have a face value of $50.
L: What about your cash, once you have your offshore bank account set up? You have to declare it if you take more than $10,000 on your person, but can you wire whatever you want?
Doug: Yes, you can send any amount of money you want, currently. It gets reported, but it’s basically unregulated. And by the way, the $10,000 limit doesn’t cover gold, but it does cover stock certificates and other financial instruments – but you can still send those by Federal Express.
L: I wonder how long that will last…
Doug: I’m sure they’ll get ’round to closing all the loopholes. So, the time to act is now. We’ll keep monitoring the situation, but when this happens, the Powers that Be won’t want anyone to see it coming, so it will zing in from left field. Your only chance to protect your wealth is to start diversifying its exposure to any one particular predatory state as soon as possible.
I have to stress again the urgency of diversifying the political risk your assets are exposed to: do it now.
L: Okay, Doug – thanks!
Doug: You’re welcome.
American employers added an estimated 88,000 jobs to their payrolls last month, compared with 268,000 in February, according to a Labor Department report released Friday. It was the slowest pace of growth since last June, and less than half of what economists had expected.
It also was the start of a third consecutive spring in which employers tapered off their hiring after a healthy start to the year. Slowdowns in the previous two years could be attributed to flare-ups in the European debt crisis, but this time the cause is less obvious. The recent payroll tax increase or other fiscal tightening in Washington could be partly to blame for the sudden retreat in hiring, but neither seems to be showing up much yet in other relevant economic data.
“People were starting to believe the economy was really picking up steam, and desperately wanted this report to be better,” said Joshua Shapiro, chief economist at MFR Inc. “But that didn’t happen.”
Economists like Mr. Shapiro cautioned that the numbers, which are adjusted for normal seasonal variations, are volatile from month to month and are still subject to revision.
Nonetheless, the closely watched monthly jobs report was discouraging.
The unemployment rate, which comes from a different survey, ticked down to 7.6 percent in March, from 7.7 percent, but for the wrong reason: because more people reported dropping out of the labor force (meaning they are neither working nor looking for work), not because more people were hired.
The labor force participation rate has not been this low — 63.3 percent — since 1979, a time when women were less likely to be working.
Baby boomer retirements may account for part of the slide, but pessimism about job prospects in a mediocre economy still seems to be playing a large role, economists say.
“The drop in the participation rate has been centered on younger workers,” said Mr. Shapiro, “many of whom have given up hope of finding a decent job and are instead continuing in school and racking up enormous amounts of student debt, which has contributed to the recent surge in consumer credit outstanding.”
Investors initially responded to the jobs report by sending the major stock market indexes down more than 1 percent. But as the day went on, strategists sent out reports noting that the economic slowdowns in previous years ended up being temporary. The Standard & Poor’s 500-stock index climbed back to end the day down only 0.4 percent.
“Given the noise in the data you don’t want to set your pants on fire about it,” said Michael Feroli, chief United States economist at JPMorgan Chase.
Job gains in March were concentrated in professional and business services and health care.
The government again shed workers, as it has been doing for most of the last four years, though reductions at the Postal Service accounted for most of the latest decline. Economists expect more government layoffs in the months ahead as the effects of Washington’s across-the-board budget cuts make their way through the system.
“While the recovery was gaining traction before sequestration took effect, these arbitrary and unnecessary cuts to government services will be a headwind in the months to come, and will cut key investments in the nation’s future competitiveness,” Alan B. Krueger, the chairman of President Obama’s Council of Economic Advisers, said in a statement.
The latest report should quiet speculation that the Federal Reserve will take its foot off the monetary accelerator anytime soon, as some had suggested after a spike in hiring in February. Even before Friday’s numbers came out, though, Fed officials had expressed concerns about not only the pace of job growth, but the quality of hiring as well.
“It’s important to look at the types of jobs that are being created because those jobs will directly affect the fortunes and challenges of households and neighborhoods as well as the course of the recovery,” Sarah Bloom Raskin, a member of the Federal Reserve Board, said in a recent speech.
She noted that relatively low-wage sectors like food services and retail businesses had accounted for a large share of the job growth in the last few years; a report in August from the National Employment Law Project, a liberal advocacy group, found that a majority of jobs lost during the recent recession were in the middle range of wages, while a majority of those added during the recovery had been low-paying.
In March, in fact, jobs in food services and drinking places accounted for the largest share of total American employment on record. Today nearly one in 13 American jobs is in this industry.
Ms. Raskin also expressed concern about temporary jobs, which account for a growing share of total employment.
“Temporary help is rapidly approaching a new record,” said Diane Swonk, chief economist at Mesirow Financial, who noted that there was also a rapid increase in temp hiring during the boom years of the 1990s. “That of course means more flexibility for employers, and less job security for workers.”
Perhaps more distressingly, 7.6 million workers who want full-time work can find only part-time work, and their missing work hours do not count toward the official unemployment rate. The number of such workers fell slightly from February, but is still about where it was a year ago.
A broader measure of underemployment, which includes those reluctantly working part time as well as those who want jobs but have stopped looking, stands at 13.8 percent.
At the same time, long-term unemployment — joblessness lasting more than six months — has been a persistent problem ever since the recession ended in the middle of 2009. And it may be partly driven by the fact that many of the jobs available do not pay well enough to be worth taking.
“When I’ve had offers for positions they’re part time or temporary, but the child care I’d need to pay to take the jobs is more costly than what I’d be getting paid for the job itself,” said Linda Rubiano, 37, of Pennsauken, N.J., a single mother with a 3-year-old boy. She was laid off from her paralegal job, which she had held for five years, in January 2012. “It’s really, really frustrating.”
Getting people like Ms. Rubiano back to work soon is critical to the economy’s future, experts say. In many cases, the longer people stay unemployed, the less employable they become.
“This seems to be a long-term sleeper crisis too, as we think about long-term unemployed workers who are in midlife and older workers who are likely dipping into retirement savings in order to stay afloat,” said Christine L. Owens, executive director of the National Employment Law Project. “We’re setting ourselves up for somewhere, 10 years down the road, when a lot of retirees who didn’t expect to live in poverty are going to be in poverty.”
Nathaniel Popper contributed reporting.
It takes a lot for an official who served at the heart of the White House to go beyond the pale in Washington, but a diatribe against all economic policy since 1933 – attacking everyone from Franklin Roosevelt to Milton Friedman – is one way to manage it.
David Stockman, budget director for Ronald Reagan from 1981 to 1985, is the man who will be short of dinner party invitations after becoming the most mainstream figure to argue that all America’s economic problems stem from the welfare state and the end of the gold standard.
Mr Stockman’s new book, The Great Deformation , highlights the enduring conservative appeal of a kind of economic primitivism that harks back to the days when laisser-faire ruled and macroeconomics had not been invented.
“The modern Keynesian state is broke, paralysed and mired in empty ritual incantations about stimulating “demand”, even as it fosters a mutant crony capitalism that periodically lavishes the top one per cent with speculative windfalls,” wrote Mr Stockman in the New York Times article that set off a minor furore in Washington this week.
The reaction, left and the right, was scathing. Jared Bernstein, former economic adviser to vice-president Joe Biden, gave one of the gentler liberal critiques. Mr Stockman, he said, was “about 11.8 per cent absolutely and totally on target” with his criticisms of crony capitalism. But the other 88.2 per cent was “a horrific screed, an ahistorical, dystopic, Hunger Games vision of America based on debt obsession and wilful ignorance of macroeconomics and the impact of market failure”.
The right was not much more impressed. David Frum, a speech writer for former president George W. Bush, called it “primitive” as economics, “silly” as advice, and diagnosed Mr Stockman with a mild case of elderly depression.
“As an insight into the gloomy mindset that overtakes us in older age, it’s a valuable warning to those still middle-aged that once we lose our faith in the future, it’s time to stop talking about politics in public,” he wrote.
Forecasts based on this world view have been spectacularly wrong in the last five years – instead of hyperinflation and a debt crisis, America has price rises of 1.3 per cent and a 10-year Treasury yielding 1.69 per cent. But Mr Stockman taps a strain of market discontent with fiscal stimulus and the US Federal Reserve’s policy of quantitative easing.
“There is nothing [Stockman says] that others haven’t,” says Peter Schiff, chief executive of the broker Euro Pacific Capital, with a similar outlook. “But when someone from the establishment criticises the establishment then everyone has to jump on him and discredit him.”
For the economic mainstream – which argues activist policy helps stabilise the economy, considers the gold standard ludicrously unworkable today, and diagnoses America’s primary problem as lack of demand – the 19th century critics are a challenge as there is some substance to the risks they identify.
There is legitimate concern about the rally in asset prices that has taken the S&P 500 index to a new high, and is spreading to real estate. Equity and property prices fell to long-run measures of fair value during the financial crisis, but not below, and have already moved above them.
“A lot of the inflation is in assets,” says Mr Schiff. “You can see it in the bond markets, you can see it in the stock market, you can see it in real estate. Real estate is already too high.”
The Fed rejects that QE – purchases of assets to drive down long-term interest rates – has formed an asset-price bubble. But concerns about stability have intensified at the central bank and led to debate about when to slow QE down.
If a bubble were to form and then to burst, it would seem to prove Mr Stockman and his colleagues right.High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email firstname.lastname@example.org to buy additional rights. http://www.ft.com/cms/s/0/da17512c-9e0e-11e2-bea1-00144feabdc0.html#ixzz2Pg8x3eil