A Viable Personal Protection PlanMay 12 • Categorized as Investments,Offshore Banking
by Michael Guard, Capital Conservator
WARNING: The following scenarios are scary, but are by no means certain. However, they are not far-fetched. The world’s financial system is teetering on the edge of complete collapse, and there are many directions the future could take. These are just a couple of possibilities.
Scenario 1: Fearing the inevitable creation of a nuclear weapon, Israel strikes at Iran’s enrichment facilities. The Middle East erupts and goes from bad to worse. The U.S. does not condemn Israel strongly enough to satisfy OPEC nations so they vote to stop accepting U.S. dollars for oil. The end of the “petrodollar” leads to a plummeting of the value of the dollar. Coupled with a deficit of over $1 trillion per year, the U.S. dollar is worth less than half of what it was – maybe a quarter or a tenth. Can you imagine spending $400 for a tank of gas? Having all your savings in U.S. dollars could be disastrous.
Scenario 2: Following a Greek sovereign default and exit from the Euro, Portuguese, Spanish, and Italian banks are unable to meet their obligations and a bank run ensues. The European Central Bank begins guaranteeing all depositors and backstopping all the banks. The Euro plummets in value and experiences hyperinflation not seen on the continent since the days of the Weimar Republic in Germany following World War I. Having all your savings in Euros could be disastrous.
Scenario 3: Governments and financial institutions tire of competing against gold and silver (since they cannot print as much metal as they would need) and decide that personal ownership of those metals is no longer allowed – this would force increased demand for their paper currency. This, as you likely know, has happened before. How bad would it be to have all your savings in gold and silver if you could not sell it to anyone legally?
Again, these events are far from certain and may not even be probable; however, they are possible. The likelihood of any of these scenarios occurring may not be great, but it is definitely greater than zero. It would not be difficult to put the probability of any one of them around 20%, but even if the probability was only 5%, shouldn’t you be prepared for that instance? The U.S. military has an operational methodology that any threat which registers as a 1% possibility warrants preparation as if that threat were a 100% certainty. Shouldn’t you have the same mindset?
So how best to protect yourself? Obviously, many of the dangers are counter to one another. If you hold gold to protect against runaway USD inflation, you get burned if gold is confiscated or outlawed.
If you hold USD to protect against EUR destruction, you get burned if the dollar tumbles. There is only one obvious solution. You must diversify your holdings.
Your diversification strategy should protect you with two different futures in mind: financial disruptions AND geo-political/personal emigration. The first factor is simple – you want to be protected and diversified across a range of assets and currencies. For example, you should hold some stocks and/or mutual funds, commodities, gold and/or silver, and at least 5 different national currencies. The second factor is a little more complicated.
You should hold a sizeable portion of these assets outside of your current country of residence and preferably in a jurisdiction with a history of privacy. Bankrupt governments have a tendency to justify confiscations and asset seizures. If you don’t believe it can happen in your current country, please review FDR’s gold confiscation, Argentina’s recent fiscal nightmare, and even Uruguay just confiscated all private pension plans placing those recipients on the public pension plan. That is like taking your 401K and paying you only your Social Security.
The U.S. debt is over 15 trillion dollars, which is to say, the government has borrowed over $15,000,000,000,000 from lenders. But the U.S. is spending $1 trillion more than it collects in revenue every year. It is a horrible credit risk. Who would lend the U.S. money? Why would they? Well, the U.S. debt is backed by the full faith and credit of the U.S. and its citizens. U.S. citizens hold $18 trillion in 401K plans – that’s called collateral, and the government knows where every penny of that is since only “qualified” brokers offer 401K’s. Naturally, part of the qualification process is full disclosure to our friends at the Infernal Revenue Service (the ‘f’ is intentional).
Obviously, FATCA is posing a problem for U.S. nationals. Many international banking institutions are refusing to accept U.S. citizens entirely – the potential income doesn’t justify the paperwork and bureaucracy. However, there are some countries that will not be complying with FATCA rules, and if you transfer money to those places now, you will avoid the 30% withholding FATCA calls for when sending to these countries from the U.S. That withholding will begin on all transfers from U.S. accounts to non-FATCA reporting financial institutions on 1 January 2013.
There are also trust banking institutions like Capital Conservator who are still accepting U.S. clients. Many of these types of institutions who make their money guaranteeing the privacy of their clientele will not be reporting to U.S. authorities. Again, you would be best served transferring money out of the U.S. to these institutions before 1 January 2013 if you wish to avoid 30% withholding.
If things get really bad; i.e. martial law, societal breakdown, etc; you may find yourself in a situation where you think it would be best to leave the country. However, if things are that bad, there would likely be impediments to traveling with large amounts of money or moving assets overseas. It would be best you already had some assets waiting for you on the other side of the border.
Diversification in anticipation of these events could make your future much less stressful. In worst case scenarios, it could save your life. How much better off were Jews who sent their assets to the U.S. prior to Nazi confiscations? When they left (if they left in time), they still had a little something to start life anew.
So, what would a properly protected portfolio look like? Let’s take a couple with $250,000 USD in savings and investments as an example. They might have:
- $50,000 invested in a domestic brokerage account
- $50,000 in gold and silver bullion either stored locally (safe or safe deposit box) or better yet, internationally (for instance, Capital Conservator, a trust banking institution, can hold physical gold and silver anonymously for its trust clients in safe deposit boxes in extremely private jurisdictions)
- $100,000 in 5 different currencies at a bank in the Cook Islands or other favorable jurisdiction (AUD, CAD, HKD, SGD, and CHF)
- $50,000 at a trust banking institution in different currencies (USD, EUR, CHF)
This is just one example. There are many ways to structure your personal financial affairs, but if you have more than $50,000, you should have at least some of it somewhere else and in different currencies and/or metals. These days, foreign monies are easily accessible domestically through ATM and debit cards as well, so in a personal emergency, funds from the foreign accounts can be accessed.
As you can see from the above example, the couple has SOME of their assets available regardless of which of the previously listed scenarios plays out. In these turbulent times, a return OF assets is more important than a return ON assets.
Editors Note: For additional information on this and similar topics, please see PremierOffshore.com