March 11, 2014
Caribbean coast, Honduras
How’s this for irony–
In our modern monetary system, the term ‘fiat currency’ refers to this absurd notion of paper currency that is conjured out of thin air by central bankers and backed by nothing but hollow promises.
‘Fiat’ is a subjunctive conjugation of the Latin verb ‘fiō’; literally translated, it means “let it be” as in “Let there be light.”
Or in this case… ‘let there be paper money,’ which pretty much crystalized the absurdity of our monetary system.
Former Fed Chairman Ben Bernanke summed this up nicely in a 60 Minutes interview he gave a few years ago in which he said, “We can raise interest rates in 15 minutes. . .”
And he was right. Central bankers can change interest rates whenever they want.
If you think about it, interest rates are nothing more than the ‘price’ of money. It’s the rate that people pay when they ‘demand’ money in the form of loans based on the supply of money available.
But this price of money is incredibly influential around the world. Interest rates affect the prices of shares in the stock market. Oil. Agricultural commodities. Real estate. Automobiles.
Almost everything we touch is affected by interest rates.
So in setting the price of money, we have given central bankers the power to effectively set the price of… everything.
Make no mistake, this is a form of price controls. And there’s not a doubt in my mind that one day (probably soon), future historians are going to look back and wonder how so many people could be bamboozled.
We have somehow been conned into believing that the path to prosperity is for the grand wizards of the financial system to conjure paper currency out of thin air.
Yet this notion of ‘money backed by nothing’ is an absurd fantasy that has failed every single time it has ever been tried before in history.
I bring this up because I want to share a chart with you that I presented yesterday to a savvy group of investors.
Bear in mind first that a central bank, like any bank or business, has both assets and liabilities.
Central bank assets are things like gold and government bonds (e.g. US government Treasuries).
Central bank liabilities are the ‘notes’ that they issue. And if you’re wondering what a central bank ‘note’ is, just look in your wallet.
If you’re in the US, those aren’t dollars. The dollar was defined by the Coinage Act of 1792 as 416 grains of standard silver.
Rather, you’ll see the paper in your pocket says “Federal Reserve Note”– a liability of the US central bank.
The difference between assets and liabilities is called equity, or the bank’s capital. And well-capitalized banks maintain substantial capital as a percentage of their assets.
You could think about this as a margin of safety. The less ‘capital cushion’ a bank has as a percentage of its assets, the less it will be able to withstand shocks to the system.
I tracked this data for the US Federal Reserve. And as the chart below shows, there has been an astounding decline in the Fed’s ‘margin of safety’ over the last few years.
The lower this line goes, the more the Fed gets pushed into insolvency.
Note that the trend levels out in early 2012, only to start another steep decline a few months later just as they told us the economy had ‘recovered’. This is apparently what recovery looks like.
The question I ask is: how low does this go before there’s a currency crisis?
March 10, 2014
En route to Honduras
Editor’s note: The following is an excerpt from an interview with Robin Speronis, the woman in Cape Coral, Florida who Simon wrote about recently that got bullied by the local government simply because she was living off the grid.
Simon: So, Robin, you’d been living a completely self-sustainable lifestyle, unplugged from the grid, collecting your own rainwater, harnessing solar power etc. since January 2013.
Then the local authorities found out… and decided to come after you aggressively just because you weren’t plugged in to the grid.
Robin: I was writing a book about living off grid, and I also have a blog where I published a few chapters—and my story got picked up by a local Fox affiliate, because they thought what I was doing was cool and wanted to do a special report on the topic.
That special report aired on November 14 last year, and immediately the next day the local code enforcement came and placed these placards on my door that said “Do not enter, do not occupy. This property is unsafe and unfit for human habitation.”
Simon: But you had been living there for eleven months.
Robin: Right. And they decided to use the Florida statute for trespassing. It was illegal for me to be living on my own property. No notice, no hearing.
Oh, and the code that they cited on that placard said that the interior of the home was unsanitary. Of course, they’d never been inside the house.
Simon: I understand they applied some vague international building code… quite a stretch just to find some violation.
Robin: Yes, the whole code is very vague, there’s no definition of what “unsanitary” means. They didn’t want me being an example for other people, so they just tried to terrorize me. But I won’t let them.
Simon: Right. And since then you’ve taken them to court basically, and you’ve had an administrative hearing. Was that something that you pushed for or was that something that the city pushed for?
Robin: Well, my story was picked up and got a lot of media attention. Initially the city backed off, and they were even ignoring my lawyer’s calls, hoping that it would blow over.
But because I was technically still a trespasser in my own home I wouldn’t let this go away. So we had a hearing.
The city read off five pages of assorted codes that I was in violation of. I already got most of them voided. So that was a big victory.
Simon: This is so typical. These government officials look at you and decide, “We’ve got to get her. She’s doing something we don’t like.” And so they just come up with pages of senseless code violations hoping that something will stick.
It’s all about terrorizing people, making them obedient, and readily dependent on the system. And anyone that defies that is an enemy to them, someone they have to go after. So they tried to make an example out of you and terrorize you.
As I’ve written so many times before, we’re all guilty of violating some obscure law or regulation. They have criminalized –everything-. You can’t even apply for a passport anymore without being threatened with imprisonment.
I’m very glad that you didn’t cave in. Thank you Robin, this is very encouraging. Best of luck with your case in the future.
March 7, 2014
I needed a caffeine jolt late this morning after the long journey up from South America.
And while I’m generally averse to aspartame, high fructose corn syrup, and other government-sanctioned poisons, I did briefly consider a hit of Coca Cola as I walked past a vending machine on my way out of a grocery store.
Then I saw the price.
To give you some quick background, this was the same grocery store my mother used to shop at when I was a kid. And if I was really lucky, we’d stop for a can of coke on the way out– 25 cents back then.
Fast forward to today–. I’m a grown man of 35 now instead of a 9-year old kid. And while the store has changed hands a few times, there’s still vending machine near the entrance.
Same coke, same 12 ounces (though now in a plastic bottle instead of an aluminium can).
Price today? $1.50. [note, this is the vending machine price, not grocery store price.]
Put another way, $1 would have bought me 48 ounces of Coca Cola 26 years ago. Today that same dollar buys me just 8 ounces.
This means that the dollar has lost 83.3% of its value against Coca Cola over the past three decades, averaging roughly 6.6% inflation per year.
Some readers may remember the price of Coca Cola being just 5c back in the early 1950s (for a 6.5oz glass)… meaning the US dollar has lost 93.8% against Coca Cola over the past six decades.
Now, we are taught from the time we are children that ‘a little inflation is good…’
And when central bankers tell us they’re targeting an inflation rate of 2% to 3%, that certainly doesn’t seem so bad. 2% is practically just a rounding error. But bear in mind a few things–1) An inflation rate of 2% is not price stability.
As Jim Rickards frequently points out, even with just 2% inflation, a currency loses over 75% of its value during an average lifespan. This can hardly be considered monetary stablilty.
And this practice of gradually plundering people’s purchasing power over time is incredibly deceitful.2) Even if, they rarely meet their target.
As this case shows, 6.6% certainly ain’t 2%. The official statistics and research papers may say 2%. Reality is much different.3) Wages often don’t keep up.
According to the US Labor Department, the median weekly wage back in 1988 was $382… or roughly 18,336 ounces of Coca Cola.
Today the median weekly wage is $831.40… or just 6,651.20 ounces.
So as measured in Coca Cola, the average wage in the Land of the Free has declined by 11,684 ounces per week– a 63.7% decline over the last three decades.
You can make a similar calculation denominated in Snickers bars, gallons of gas, etc.
If you have a big picture, long-term view, it’s clear that standard of living is falling.
Some readers may remember decades ago– a single parent could go out and, even with a blue collar job, comfortably support a growing family.
Today, dual income households struggle to keep their heads above water. This is the long-term plunder of inflation.
And just to give you a reminder of what things used to cost, I’ve pulled a page from the March 7, 1988 edition of the Bryan Times of Bryan, OH: 26-years ago today.
You can scroll through the paper and note the prices:
25c for a dozen eggs. 69c for a loaf of bread. 49c for a pound of Chicken. A brand new Mustang LX for just $9203.
That’s the Federal Reserve for you. 100 years of monetary destruction and counting.
Cartagena, Colombia: Because of a $47 dispute the whole world got to know about Cartagena, a city on Colombia’s Caribbean coast. For all the wrong reasons, unfortunately.
Two years ago Cartagena hosted the Summit of the Americas, a get-together of all heads of state for countries from North, Central, and South America, bar Cuba.
Before Barack Obama got there a group of Secret Service agents that descended on Cartagena decided to have some fun. And apparently it was a wild night.
It would probably all go down unnoticed – including the summit in Colombia itself – had it not been for a huge ruckus and dispute the next morning with the girls that the agents brought back to their hotel over the payment for their services.
Cartagena deserves its attention for a host of other reasons, however.
It was one of the most important cities during the expansion of the Spanish Empire in the Americas. Its port was a major trading hub for gold and silver mined in New Granada and Peru. Galleons loaded with precious metals would depart from Cartagena for Spain.
Because of its economic and subsequent political influence in the Americas the city had a strong presence of royalty and wealthy viceroys. Its riches made it the top target for pirates and Cartagena is THE city most associated with pirates in the Caribbean, and the world.
To defend against the plundering the Spanish have built an elaborate system of walls, fortifications, bastions, and castles. The construction began after the attack by Francis Drake in late 16th century and took an incredible two hundred years to complete.
Thanks to those efforts, however, Cartagena’s old colonial town is today immaculately preserved.
It’s an incredibly charming place full of colorful balconied houses, open plazas, imposing colonial administrative and religious buildings, horse-drawn chariots clomping through the streets, performers, flamboyant fruit sellers, musicians… etc.
The place has a great jovial vibe. But that’s not all there is to Cartagena.
Just a 5-minute taxi ride away and you can change the fairy-tale romantic old town for a Miami Beach-like setting in Bocagrande where new high-rise hotels and apartment buildings are popping up like mushrooms after autumn rain.
No wonder the place is a tourist magnet. Most of them are from other Latin American countries, however. There are hardly any Western tourists here, apart from an odd backpacker.
For now the property market is largely driven by Colombians who have favored this Caribbean town for a long time. It’s still an “undiscovered” investment haven when it comes to foreign, and especially Western investors for now.
That’s something that’s bound to change as Colombia goes through its transformation period and sheds it bad-boy image.
A few European investors have already started coming in. But the potential that Cartagena has is enormous, given its bountiful attributes.
And the time to get in on the action and enjoy the spoils of its rise to prominence again is now, especially as practically no one else is looking at it.
March 5, 2014
En route to Colombia
President Obama released his 2015 budget proposal yesterday… and as expected, it contained even more language about his MyRA initiative.
As we’ve discussed so many times in the past, IRAs are an irresistible kitty for such a bankrupt government.
The US government itself estimates that over $5 trillion is tucked away in American retirement accounts.
They need that money. Your money.
Think about it– the Chinese are starting to dump their US Treasuries in record numbers. The Social Security trust fund is also on track to start dumping Treasuries in order to pay out record numbers of retirees.
The US government is struggling to come up with new funding sources… and retirement accounts are by far the easiest target.
Why? Because the majority of retirement accounts at trapped at big Wall Street banks, which are all de facto agents of the government. All the Treasury Department has to do is make a phone call.
Of course, they’ll claim that it’s for your own good. I suspect they’ll wait until there’s a big stock market crash and then say “We must protect Americans from such risky investments. And that’s why today we are requiring these banks to invest a portion of the retirement accounts they manage in the safety and security of US government Treasuries.”
A few weeks ago in his Sad State of the Union address, President Obama announced this MyRA program– a new initiative that will “help” Americans invest directly in US Treasuries.
Then he looked everyone in the eye and said, “These accounts will never go down in value…”
Naturally. How could loaning money at rates which don’t even keep pace with inflation to a country that has racked up more debt than any other nation in the history of the world possibly pose a risk?
After announcing MyRA, Mr. Obama took to the streets, and his team took to the media… flooding newspapers and airwaves with MyRA propaganda.
Yesterday’s budget announcement constitutes the next phase: automatic enrollment.
And I suspect that, just like Obamacare, there will soon come a time when it will become MANDATORY to have some sort of retirement plan set up, naturally with the government option at people’s fingertips.
This isn’t some far-fetched conspiracy theory. In fact, it’s already happened in so many countries over the last few years– from Argentina to Ireland to Poland.
In fact, even the Treasury Department grabbed government pension funds at least three times since 2011 in order to plug temporary funding gaps.
The Federal Times, a publication for senior government managers, ran a story back in 2011 entitled “Treasury raids your pension – but don’t worry, Geithner says”.
This idea is no longer theory or conjecture. It’s happening, and the conclusions are all supported by the data.
Anyone who thinks ‘that will never happen here’ is really fooling themselves… and playing very dangerous games with their hard-earned savings.
March 5, 2014
En route to Colombia
“Putin: Unconstitutional coup is taking place in Ukraine. The U.S halted military cooperation and trade negotiations with Russia”
That’s the headline from a Beijing newspaper– and no surprise that it leans slightly to the Russian side.
The article goes on:
“Russian president Putin said on 4th March that unconstitutional coup is taking place in Ukraine and Russia will only use the army to Ukraine under “the most extreme situation”. This was the first time that Putin declared this publicly since the escalation of the situation in Ukraine.”
“U.S. Secretary of State John Kerry threatened on March 2nd that the U.S and allied countries will take a series of actions including visa ban, capital controls, economic and trade sanctions, etc.”
“The White House issued this in a joint statement signed by the Group of Seven member countries and accused Russia of violation of the territorial integrity of Ukraine. The White House also declared temporarily not to participate in the preparation for the G8 summit scheduled for June in Sochi, Russia.”
– and of course :
“Chinese Permanent Representative to the United Nations Liu Jieyi called for dialogue of all sides to resolve differences and maintain regional peace and stability. The united nations security council held an emergency meeting on the Ukrainian situation. Liu Jieyi said in the meeting that China is deeply concerned about Ukrainian situation and condemn the extreme violence in Ukraine.”
Meanwhile, Russian newspaper Itar Tass had this headline (loose translation):
“Putin: Those [foreign nations] who are talking about imposing sanctions on the Russian Federation should first consider the impact of those sanctions”
The article goes on:
“President Putin told reporters that the damage to all countries involved is mutual:
“We can cause damage to each other– mutual damage. And this needs to be thought about. . . We believe our actions are fully justified. And any threats to Russia are counterproductive and harmful.”
Mr. Putin added that Russia is still preparing for upcoming G8 meeting.
“If [the other countries] do not want to come, they don’t have to,” he told reporters .
The Russian President also expressed the opinion that the U.S. has historically created its own geopolitical goals, and then dragging along the rest of the world underneath them:
“Our partners, especially in the U.S.– they always clearly formulate their geopolitical interests and pursue them very aggressively. Guided by the well-known phrase, “you are either with us or against us,” they drag the rest of the world along, underneath them. And whoever doesn’t go along is beaten and usually killed,” the President told reporters.
He emphasized that Russia’s actions come from legitimate grounds.So on one hand, the Chinese are essentially making the West out to be the belligerents, the Russians to be defending their interests, and the Chinese as the strong diplomats who are pushing for peace.
And on the other hand, the Russian papers are highlighting the utter hypocrisy of US foreign policy– it’s OK for America to invade whatever country it likes, but not for Russia to defend its own interests.
March 4, 2014
Sovereign Valley Farm, Chile
Warren Buffet sees a different America than I do. I would wager he sees a different America than untold millions of people do too.
And with due respect to the kind-hearted Mr. Buffet, who is undoubtedly an accomplished and savvy investor, the man has been a major beneficiary of the greatest monetary fraud ever pulled in the history of the world.
In his most recent annual report just released yesterday, Mr. Buffet lauds the United States of America, writing:
“Indeed, who has ever benefited during the past 237 years by betting against America? If you compare our country’s present condition to that existing in 1776, you have to rub your eyes in wonder. And the dynamism embedded in our market economy will continue to work its magic. America’s best days lie ahead.”
Such language is typical for Mr. Buffett, he is one of America’s biggest cheerleaders. Again, with good reason.
For one, the unprecedented monetary expansion over the last decades has created a major boon for Mr. Buffet and his net worth.
His company Berkshire Hathaway has a balance sheet worth $485 billion. 25% of that is simply invested in the stock market with big chunks of Coca Cola and American Express.
These stock prices have boomed in an era of unprecedented money printing, adding billions to Mr. Buffett’s net worth.
Second, it’s important to note that over 75% of Berkshire’s revenue comes from highly regulated, absurdly profitable, tax advantageous businesses that are simply not accessible to the average guy.
For example, Mr. Buffett gleefully writes about the $77 billion ‘float’ from his insurance businesses.
This is money that is collected from insurance customers. And while he might have to pay out insurance claims someday, for now he gets to borrow from that kitty at 0% and generate higher returns elsewhere.
On top of this, Mr. Buffett has been able to defer a full $57 billion in tax, indefinitely kicking the can down the road on his IRS bill thanks to industry-specific tax rules.
Again, you and I couldn’t do this because we don’t have access to these special privileges. Warren Buffett does.
Warren Buffett also has special access to lawmakers in the US who clamor to be in his favor.
During the early days of the financial crisis in 2008, for example, Buffett was getting desperate phone calls from the Treasury begging him to make investments in the financial system.
And as a result, he was able to arrange sweetheart deals, brokered by the US government.
It also may just be a wild coincidence that the US government has rejected the Keystone XL pipeline… and Mr. Buffett’s railways just -happen- to be among the prime beneficiaries.
Yes, I think if we all had the special privilege, access, and benefit that Warren Buffett enjoys, we too would all be jumping for joy about America.
But Uncle Warren lives in a different America– the America of the past.
With due deference to his investment acumen, Mr. Buffett should know that no nation in history has been able to -permanently- stand atop the world’s economic mountain.
Like human beings ourselves, nations also rise, peak, and decline. It is their own life cycle.
And the America that Mr. Buffett doesn’t acknowledge is the one that is in debt past its eyeballs.
It is the America that spies on its citizens and threatens people with imprisonment for victimless crimes and administrative transgressions.
It is the America that conjures trillions of paper dollars out of thin air in total desperation, sending the labor force participation rate to multi-decade lows.
It is the new America that exists for a tiny elite at the expense of everyone else.
March 4, 2014
Sovereign Valley Farm, Chile
This is just too funny… not in that ‘ha ha’ funny way, but a very ironic funny. It’s British humor, folks.
The White House announced on Saturday that President Obama had a 90 minute phone call with Russian President Vladimir Putin about Ukraine’s territorial sovereignty.
Now, I’m going to play Captain Obvious for a moment and point out the unmistakable truth that the US government doesn’t care about Ukraine. They just don’t like the idea of a tough-guy Russia.
But here’s the funny part, because I’m sure we’ve all been on long, boring conference calls before.
I have this image in my mind of Putin putting Obama on speaker phone during this call, hitting the ‘mute’ button, and having an aggressive round of drinking games while they all make fun of POTUS and take turns doing Obama impressions.
And as Obama hit the high note, Putin probably gave signal to his generals right then and there, in the middle of the call, to push troops forward into Ukraine.
Because the sad part about this is that Mr. Obama actually believes that Putin gives a damn what the US thinks about Russia.
Seriously, if the shoe were on the other foot, would Mr. Obama care what the Russians thought if the US decided to invade… Syria? Oh, wait.
Yes, this is a movie we’ve all seen before. It’s entitled “Too broke for war”, and I personally like the British version the best.
You probably recall, the British government was too broke for war back in 1956 to seize control of the Suez in Egypt after Nasser nationalized the canal.
Or the Spanish version of the same episode– back in 1898 when the Spanish government was too broke (and broken) to maintain its global colony network. They ended up losing Cuba, the Philippines, etc. to the upstart US empire.
The US has reached that point– too broke to project any power overseas.
Mr. Obama was already stopped by Russia from invading Syria late last year, and at this point the Russians know that Mr. Obama is armed with little more than harsh words and a mean jump shot.
In fairness, it’s unlikely that Mr. Putin has any intent to Annex greater Ukraine. Ukraine is viewed as a quaint, somewhat backward place by Russians. There is no great pan-Slavic nationalism at play here.
This is nothing more than a strutting peacock show right now, and it will end once he has proved his point. But unlike France, the US, the UK, etc., Mr. Putin actually has the funds to do it.
But the most ironic part of this sad little episode is that the US government was caught totally off guard… completely unaware of Russian troop movements.
I mean, seriously, why in the world are they spending tens of billions of dollars a year to spy on the whole world? They’re archiving all of our emails, listening to our phone calls, hacking our webcams… and they can’t put 2 and 2 together to figure out that Putin is going to invade Ukraine?
Talk about an utter intelligence failure.
It’s national security theater of the absurd, brought to you by the same folks who can’t put a website together.
March 3, 2014
[Editors note: Tim Price, Director of Investment at PFP Wealth Management and frequent Sovereign Man contributor is filling in for Simon today.]
A few weeks ago, William White (former economist at the Bank of England, the Bank of Canada, and Bank of International Settlements) made a frank admission.
And while we search for assets whose prices are less obviously distorted by malign government intervention, it’s refreshing to hear a mea culpa from a member of the economics “profession”.
“The analytical underpinnings of what we [mainstream economists] do are actually pretty shaky. A reflection of that fact, is that virtually every aspect you can think of with respect to monetary policy, about best practice, has changed and changed repetitively over the course of the last 50 years. So, this stuff ain’t science.
“Think about what’s happened recently. One, its completely unprecedented. People are making it up as they go along. This is hardly science – building on the pillars of the past.
“Secondly, what they’ve been making up as they go along actually differs across central banks [The Bundesbank, for example, is fighting the threat of high inflation, whereas the Fed is more concerned about the prospect of deflation]. They can’t even agree amongst themselves about what’s the best way to do things.
“I’m becoming more and more convinced that all of the models we use are basically useless.
“It’s surprising that we’ve had this huge crisis that the mainstream didn’t predict. It’s gone on for years, which the mainstream absolutely didn’t predict. I would have thought this was a basis for a fundamental rethink about what we used to think we believed. But that hasn’t happened.
“The policies that we’ve followed – on the monetary side at least – since 2007 are just more of the same demand-stimulating policies that we’ve been following, I think, erroneously, for the last 30 years.
“We’ve got the potential to do so much harm by not getting the creation of fiat credit and money right. We’ve got the capacity to do so much harm that we should be focusing much more on making sure that doesn’t happen.”[End quote]
Doctors at least have the Hippocratic Oath: first, do no harm. If only economists and central bankers had a similar ethic.
But they don’t. So they continue ‘making it up as they go along’, as Mr. White suggests, applying failed ideas with impunity and continued authority to an unquestioning public.
Warren Buffett famously compared financial markets to the card table, observing that if you’ve been playing poker for half an hour and you still don’t know who the patsy is, then you’re the patsy. It seems we are all patsies now.
You can listen to the full interview here:
February 28, 2014
Sovereign Valley Farm, Chile
“Hey I just wanted to let you know, a guy from the local government was here today…”
That was one of the first phone calls I received from the manager of this place just a few days after I had taken over this farm a couple of years ago.
A visit from the government seemed harmless enough. My friends back in the US who were farmers always complained about incessant, nonstop visits from various federal, state, and local agencies ranging from immigration to census workers to food inspectors.
“How often do they come around?” I asked, hoping the answer would be something like ‘monthly’ or ‘quarterly’.
“I haven’t seen anyone from the government in eight years…”
Nice. And he was right.
In the years since then, there was only one ‘emergency’ instance in which some guys from the Agriculture Department came to warn us about a plant disease going around which might damage the grapes.
As they drove off I thought of that old Reagan quote– “wow, they’re from the government and really were here to help…”
In stark contrast, a rather depressing story emerged from the Land of the Free this week demonstrating how the FDA is taking a very heavy hand to American farmers.
The LA Times reports that federal agents are swarming onto private properties across the country to regulate how Mom and Pop farmers grow their organic produce.
Of course it’s all in the name of protecting the American people. Just like the body scanners they installed at airports, why they spend hundreds of billions on foreign wars, why they read all of your email, and why they’ve launched a government retirement program. For your protection.
So now there’s a bunch of bureaucrats dictating everything from how organic farmers are allowed to compost, to how close animals can be to the crops.
(Naturally the big guys like Monsanto get a pass…)
Unfortunately it’s pushing small farmers out of business. Don Bessemer of Akron, Ohio recently called it quits after the government bureaucrats proved too much to handle:
“We haven’t poisoned anybody with an ear of corn for 117 years and we’ve shipped it all over. . . I can fight the bugs, I can fight the lack of rain, but when the guy comes with a clipboard what are you going to do?”
This is central planning at its finest. And it’s a pretty sad state of affairs when the only options are (1) going out of business, or (2) dealing with bloodsucking bureaucrats who know nothing about your business.
The truth is, though, those aren’t the only two options. As we tell our students each year at our summer entrepreneurship camp, there’s an entire world out there full of incredible opportunities.
Colombia, where my team and I just came from, is a place with amazing undiscovered possibilities. Here in Chile is another that I discuss frequently.
The world is full of thriving nations with boundless opportunities where you don’t have to serve feckless bureaucrats.
This is a hard mental adjustment. We’re programmed to view anything outside of our home country as perilous and to fear the unknown. So many folks would rather suffer in a place they know rather than take a chance on a place they don’t.
Fortunately it’s rather easy to overcome this mental hurdle by starting slowly. I’ve seen hundreds of people take their first trips overseas and be shocked at how modern and civilized many foreign countries are.
They find out it’s not so scary after all. And it sure beats the slow grind of watching your freedom and livelihood erode.
February 27, 2014
That’s how much the old Medellin drug cartel under Pablo Escobar used to lose annually to rats that would eat the currency stored in their warehouses.
At its height, the cartel was smuggling 15 tons of cocaine per year into the US. And its leader Pablo Escobar was one of the richest men in the world… so rich, in fact, he offered at one point to pay off Colombia’s $10 billion national debt.
At the time their home base of Medellin was the most violent city in the world owing to urban wars among Colombia’s rival drug cartels. The city’s people mostly stayed at home and there was hardly any social life.
But things started to change dramatically with the death of Pablo Escobar in 1993, and even more after 2002 when Colombia’s president Álvaro Uribe used the military to disband urban militias.
Today, Medellin is one of the most vibrant cities on the South American continent. The crime rate is now lower than in most US cities. Over the past 20 years it has gone through a remarkable urban renewal and revitalization.
The city’s parks have been brought back to life, urban transport is widespread and efficient, including a metro system and cable cars that ferry people up and down the hillside.
Most importantly, the people have shrugged off worries and dark memories of the turbulent past and now look into the future with excitement and optimism.
There is a very noticeable ‘can do’ mentality here, which stands in stark contrast to some other places in Latin America.
The city lies about 1,500 m high in the Andean mountains and the sky is quite literally the limit here.
In 2012 Medellin was named as the most innovative city in the world in a competition sponsored by The Wall Street Journal and Citi, beating New York and Tel Aviv as the other finalists.
It boasts 32 universities, a technological innovation hub, and a manufacturing cluster—it’s the top exporting region of Colombia. International companies are increasingly choosing Medellin as their Latin American headquarters.
Foreigners are slowly getting taken over by the charms of the city—its perfect climate with stable year-round temperatures of 16-28 degrees and no humidity despite being near the Equator.
Medellin has an exciting, vibrant culture and social life… not to mention tremendous opportunities as Colombia shrugs off its outdated stigma. The country is truly emerging as one of the most exciting investment and business environments in the world.
In fact, Medellin’s property market is one of the most attractive I’ve seen.
For a city of its size, its increasing economic might, and its allure for foreigners, it’s incredible that you can still find beautiful bargain-priced apartments and penthouses in the best areas of the city for around $1,000 per square meter.
If you’re in search for attractive and exciting investing, business and lifestyle opportunities, Medellin should definitely be on your radar.
[Note to Premium Members: We’ll be discussing all of these in an upcoming Alert. And if you're not a premium member yet you can join us here]
February 26, 2014
Pop quiz: When really nasty criminals and dictators want to hide their illicit gains, which country do they go to?
I’ll make this easy for you– multiple choice:
b) British Virgin Islands
c) Hong Kong
With all the drama, history, and stigma surrounding Switzerland, most people would choose (A).
Yet over the last few years, Switzerland has worked hard to shed this reputation, even going so far as to propose laws making it easier for them to freeze dictators’ funds.
But in reality, the correct answer to the question is (D), none of the above. It’s the United States of America.
Despite being at the forefront for every other country in the world to eradicate banking privacy, the US government has hardly done a thing about the huge cracks in its own banking system… at least when it comes to foreigners.
Many states ranging from Delaware to New Mexico boast corporate entities that can be completely private, especially for foreign shareholders.
Not to mention, attorney-client privilege laws in the US mean that a lawyer can be inserted between a foreigner and their Delaware bank account, making the funds virtually untraceable back to the original shareholder overseas.
Last– the US banking system is so large with hundreds of billions of dollars of inflows and outflows, it’s quite easy for several hundred million to slip right past the radar.
So if you’re a villainous dictator who has plundered your citizens’ wealth, you’d be a fool to stash that cash away in Switzerland. Wall Street banks are waiting with open arms, and Saul Goodman is just a phone call away.
None of this, by the way, is any wild conspiracy theory. It’s all fact… validated by the US government itself.
You see, the Financial Crimes Enforcement Network (FinCEN), an agency of the US Treasury Department, sent out a rather frantic email blast to banks across the United States yesterday about former Ukrainian President Viktor Yanukovych.
Mr. Yanukovych recently fled his home country and is on the run from mass murder charges. And as you can imagine, he has spent years plundering the wealth of Ukraine.
FinCEN recognizes that Yanukovych has substantial assets stashed away in the Land of the Free… and they’re keen to avoid yet another embarrasing public scandal in which the US banking system is caught financing a fugitive dictator.
So their email yesterday was a not-so-subtle suggestion to banks across the country that they should sound the alarm bells with respect to “suspicious movements of assets related to Viktor Yanukovych. . . and other senior officials resigning from their positions or departing Kyiv.”
It certainly begs the question– why would FinCEN send out such an admonishment to US banks?
Simple. Because while ordinary citizens are treated like dairy cows and medieval serfs, FinCEN knows that the United States is the #1 financial safe haven in the world for foreign criminals and dictators.
February 25, 2014
En route to Colombia
Li Mi-Yung just wanted to be free.
This 55-year old widow in North Korea had spent the last 18-months building up an off-grid residential homestead. She was, for the most part, fully independent.
She collected rain as a source of water. She had her own waste disposal. She generated her own electricity from the sun.
Sounds pretty admirable, right? Especially in a place where so few people are independent.
Unfortunately, upon finding out about Ms. Li’s living situation, the local authorities in North Korea dispatched entire teams of government workers to Ms. Li’s home, attempting to evict her and haul her in front of a tribunal.
Truly despicable. You’d think that the North Korean government would be eager to learn from her so that everyone else’s lives could be improved.
But alas, what else can one expect from the government of North Korea…?
There’s just two minor corrections I need to make to this story before I go on, though.
Li Mi-Yung is really Ms. Robin Speronis. And she does not live in North Korea. She lives in Cape Coral, Florida… in the Land of the Free. Everything else is true.
Yes, rather than try to learn from Mr. Speronis in an effort to improve the city’s public services, she was apparently branded as some kind of criminal mastermind who must be stopped at all costs.
When they heard last November that she was living off-grid, the city posted a notice of eviction, citing numerous code violations. They concluded that her dwelling (which she had been living in since January) was “unfit for human habitation.”
Furthermore, she was told that continuing to live at (or even ENTERING) the property would constitute misdemeanor trespassing and subject her to arrest.
Days ago, the case was heard in front of a special magistrate. City officials read off a seemingly endless list of code violations, and expert witnesseses were paraded into the court to confirm her nefarious deeds.
Naturally. Someone who unplugs from the system can only be trouble.
At the end of the hearing, the judge waived his hand, finding her guilty of some violations, not guilty of other violations, and then ordered her to at least partially plug back in to the grid.
I wish I could use a word like “amazing”, “unbelievable”, or “incredible” here. But I can’t. Because this is now par for the course in the Land of the Free.
Collecting rainwater now constitutes a crime. Being free and independent gets you threatened with eviction and hauled into court.
In the Land of the Free, you are unfit to decide for yourself how you want to live. And the government has all the power in the world to forcibly bend you to its will, even if it means terrorizing citizens into using public utilities.
It’s quickly getting to the point where anyone who wants to take back any personal freedom is going to have to seriously consider heading overseas to places where governments leave you the hell alone to live your life in peace.
Yes, it’s a radical thought. But so many great civilizations before were founded by intrepid free men and women who left their home countries in search of liberty and opportunity.
Why not now?
February 24, 2014
Sovereign Valley Farm, Chile
It’s like 34 drunken sailors holding each other up. That’s the best way I can think of to describe the latest product from the good idea factory that is the OECD.
Over the weekend in yet another cushy five-star hotel, representatives from this unelected supranational bureaucracy announced plans for world governments to exchange all their citizens’ tax and financial data with one another.
The 34 members states of the OECD are enthusiastically supporting this measure. And it constitutes the end of whatever remains of financial privacy.
The premise behind the OECD’s destructive pipedream is, as usual, to stamp out ‘tax evasion’. But this is a misnomer to being with.
Just about every multinational company out there employs strategies to reduce their current tax liabilities that are perfectly legitimate based on existing tax laws.
This is why companies like Google and Apple famously earn billions in profits but pay almost no tax. They’re vilified. But it’s legal.
These companies have shareholders from all over the world. And their solemn responsibility is to maximize shareholder value… not maximize the amount of funds that politicians in a single jurisdiction get to blow on wars and welfare.
There are also isolated individuals who are sitting on undeclared income stashed away in an overseas bank somewhere. But the aggregate amount is tiny compared to the $60+ billion that Microsoft alone has stashed away overseas, untaxed.
You’d think they’d get at the root cause of the problem and try becoming more competitive… lowering tax rates and streamlining government operations (shocker!)
But no. Instead they resort to even more Draconian tactics to lord over private citizens’ financial records and unilaterally set aside long-standing international treaties.
It’s a pathetic display of exactly the sort of tactics that governments embrace when they go broke. And most of these OECD countries ARE broke– Italy, Japan, the US, Spain, Greece, etc.
So what we have now are a bunch of bankrupt member states who think that they are helping the other bankrupt member states raise revenue by terrorizing citizens (rather than actually fixing the problem).
It’s genius. But what else can one expect from the OECD?
This is the same organization which said, in the same meeting over the weekend, that Germany should accept higher inflation so that the rest of Europe wouldn’t suffer from deflation.
The arrogance is astounding.
This is the same logic as borrowing your way out of debt and spending your way out of recession… brought to you by the same guys who completely missed all the warning signs of the Global Financial Crisis. Along with the IMF. The Federal Reserve (and every other central bank in the world). And every government out there.
Yet these are the rocket scientists who pull the levers that control the system.
It behooves anyone who can see the big picture to distance yourself as much as possible from this system.
This means, for example, keeping a portion of your savings in real assets that they cannot control, as opposed to paper assets that they conjure and manipulate.
Most importantly, it means not having all of your eggs in one basket. Bankrupt governments will resort to any measure they feel is necessary to maintain the status quo.
And if you live, work, invest, bank, run a business, own real estate, etc. all in one of these bankrupt countries, you are really taking on tremendous risk.
February 21, 2014
Sovereign Valley Farm, Chile
I need to caveat this missive and highlight that I am not a pessimistic person. I’ve traveled to so many places over the years– well over 100 countries. And I typically visit 30-40 each year.
So I’ve seen first hand the tremendous opportunity that exists in the world, and the incredible way that human beings innovate to overcome challenges.
But the reality is that the world is on fire right now. In some places, like Ukraine or Thailand, quite literally.
In many others (like Japan, China, and much of southern Europe), there are heaps of smoldering embers beneath a continent-wide funeral pyre.
And in the Land of the Free, it’s as if politicians and central bankers are smoking their back-room cigars at the foot of a mountain of napalm and thermite that grows ever-higher by the day.
If you step back and look at the big picture, there is cause for concern.
For one, the tiniest elite has achieved record wealth thanks to the endless money printing of central bankers. The richest 300 people in the world alone addded $524 billion to their fortunes in 2013, while billions of other people across the planet pay higher prices for food and fuel.
This gap between rich and poor has grown to its widest since the Great Depression… and I would argue in many ways since the feudal system.
Obviously this isn’t a tirade against wealth, but rather the massively disproportionate benefits realized by a tiny elite at the expense of everyone else. And it exists because there is no separation between Bank and State. As Henry Ford said,
“It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
Well, it’s happening. People might not fully understand how central banking works. But they know there is something very rotten in the system.
And they’re starting to realize that it doesn’t have anything to do with a single party, or an individual. Even in the Land of the Free, more voters than ever are disgusted by both parties and identify with neither.
This is fundamentally what’s happening in Ukraine. People understand the system is rotten to its core– that a band of criminals has taken control, and that ‘elections’ will only serve to put a new band of criminals in control.
It is precisely what will likely play out in southern Europe, where unemployment among the youth (i.e. those of revolutionary age) is astoundingly high. And potentially even in the Land of the Free.
It’s an uncomfortable and contentious notion, I know. But this rotten system is fundamentally the same in the developed west. The only difference is there is even more debt underpinning it.
Every living creature has a breaking point. It is in our instincts to rise up when threatened.
And rather than watching these kinds of events unfold on TV thinking, “That could never happen here,” I would suggest looking at the situation rationally, and historically. Many great civilizations before arrogantly assumed the same thing.
So the question to ask is, “Am I prepared if this kind of turmoil ever comes to my doorstep?”
February 20, 2014
Sovereign Valley Farm, Chile
I read it twice to make sure my brain had processed the number correctly. Yep, 4.1%.
This was the annual yield promised on a new 5-year bond investment that a private banker colleague had sent to me. I couldn’t believe it.
The bond issuance was by a state-owned company in India. And despite the Indian government having a -very- recent history of capital controls, price fixing, and asset confiscation, and despite the company being rated near JUNK status, the bond only carried a yield of 4.1%.
This is really amazing when you think about it. Central bankers have destroyed money and interest rates to the point that near-bankrupt companies in shaky jurisdictions can borrow money for practically nothing.
It’s an utter farce. The rate of inflation is -at least- 3% in many developed countries. Central bankers will even say they are targeting 3% inflation.
This means that if investors simply want to generate enough income so that their after-tax yield keeps pace with inflation, they have to assume a ridiculous amount of risk.
This is a really important point to understand given that the global bond market is so massive– roughly $100 trillion, with nearly $1 trillion traded each day in the US alone.
This is almost twice the size of the global stock market. And even if people never invest in a bond themselves, they’re directly connected to the bond market.
Your pension fund owns bonds. The bank that is holding on to your money owns bonds. The companies listed on the stock market that you invest in own bonds.
Yet bonds are some of the worst investments out there right now. And that’s saying a lot given how overvalued stock markets are.
Here’s the bottom line: adjusting for both taxes and inflation, bondholders are losing money, even on risky issuances.
Think about it– if you make a 4% return and pay 25% in taxes, your net yield is 3%. If inflation is 3%, your entire gain is wiped out… so you have taken that risk for nothing.
If inflation rises just a bit then you are in negative territory.
There are those who suggest that deflation is a much greater risk right now than inflation… and that bonds are great investments to own in the event of deflation.
But here’s the thing– even if deflation takes hold and prices fall, anyone who is deeply in debt is going to feel LOTS of pain. Instead of their debt burden inflating away, now they’ll be scrambling to make interest payments.
So while bonds are a sensible deflationary investment in theory, in practice deflation will only increase the likelihood of default. This puts many bond investments at serious risk.
Last, if interest rates rise from these all-time lows, a bond’s value in the marketplace will plummet. So not only will you have made zero income, you would be looking at a steep loss if you try to sell.
Longer term, fixed rate bonds in weak currencies are almost guaranteed losers and should be avoided at all costs. You would be much better off setting your cash ablaze in a bonfire. It’s at least a better story to tell and will save you years of anguish watching your position erode.
Premium members: watch out for an alert this afternoon in which Jim Rickards (author of the acclaimed Currency Wars and one of the smartest guys in finance) gives some really great investment advice and thoughts on how to structure one’s portfolio amid all of this insanity.
February 19, 2014
Sovereign Valley Farm, Chile
It’s pretty ironic that I have two visitors right now in my home– one from Ukraine and the other from Thailand.
Both of their countries are in the midst of chaotic turmoil right now, characterized by riots and violent clashes between protestors and police.
It reminds me of the old quote from Louis XVI upon being informed in 1789 that the French people had stormed the Bastille. The King asked, “Is it a revolt?”
“No, sire,” the duke replied, “It is a revolution.”
People in both of these countries have reached their breaking points. In Ukraine especially, economic conditions have deteriorated in almost spectacular form.
History is packed with examples of how people rise up in the streets whenever economic conditions deteriorate.
The French Revolution in 1789 is one famous example; the French people finally reached their breaking points after nearly starving to death.
The 2011 Egyptian Revolution and entire Arab Spring movement is a similar example.
In fact, a 2011 study from the New England Complex Systems Institute showed a clear statistical correlation between social unrest and (specifically) food prices. The higher food prices get, the greater the chances of riots and revolution.
This is not a condition exclusive to the developing world; it is a fundamental human trait to provide for one’s family.
And while human beings will take a lot of crap from their governments– stupid regulations, higher taxes, erosion of freedom, and even inflation– the moment that a man is no longer able to put food on the table for his family, revolution foments.
Europe and the US are not immune to this. And with deteriorating wealth gaps, 50%+ youth unemployment, unchecked government power, and a system that disproportionately favors the elite, the conditions are ripe.
The main difference is that Westerners have been brainwashed into believing that the civilized people voice their grievances in a voting booth rather than doing battle in the streets.
It’s a false premise. Unfortunately, so is violent revolution.
As my dictionary so perfectly defines, “revolution” has two meanings.
First, it can denote an overthrow of a sitting government, whether violent or ‘bloodless’.
But in celestial terms, ‘revolution’ denotes a complete orbit around a fixed axis. In other words, after one revolution, you end up right back where you started.
So whether violent or non-violent, or whether in a voting booth or on the streets, revolutions put a country right back where it started.
In the French revolution, people traded an absolute monarch in Louis the XVI for a genocidal dictator in Robespierre for a military dictator in Napoleon.
In 1917, the Russians traded Tsarist autocracy for Communist autocracy.
In 2011, Egyptians traded Hosni Mubarak for Mohamad Hussein Tantawi (who subsequently suspended the Constitution), for Mohamed Morsi (who as President awarded himself unlimited powers), for yet another coup d’etat.
All of this is because of a knee-jerk reaction– ‘if our country is having major problems, we should throw the bums out and let the man on the white horse take over.’
This creates a never-ending cycle in which the fundamental problems perpetuate.
It’s not about any single person or group of people. It is the system itself that needs changing.
In our system we award a tiny elite with the power to kill, steal, wage war, educate our children, and conjure unlimited quantities of paper money out of thin air.
This is just plain silly. And antiquated. We’re not living in the Middle Ages anymore where we need kings to tell us what to do, knights to keep the peace, and serfs to do all the work (and enrich the nobles).
Yet this is not too far from the system we have today.
This idea is beginning to resonate with more and more people who are increasingly disgusted with the system… and all parties.
With our modern technology, transportation, and access to information, we have all the tools available to do this.
February 18, 2014
Sovereign Valley Farm, Chile
Probably every kid in the world has at some point dreamed of having a time machine and being able to travel back to the past… usually to see dinosaurs or something like that.
Time travel is an almost universal fantasy. And if I could snap my fingers and turn the pages of time, I’d be seriously curious to check out the thousand-year period between the decline of the Western Roman Empire and the rise of the Renaissance.
They used to refer to this period as ‘the Dark Ages’ (though historians have since given up that moniker), a time when the entire European continent was practically at an intellectual standstill.
The Church became THE authority on everything– Science. Technology. Medicine. Education. And they kept the most vital information out of the hands of the people… instead simply telling everyone what to believe.
People living in that time had to trust that the high priests were smart guys and knew what they were talking about.
Interpreting facts and observations for yourself was heresy, and anyone who formed original thought and challenged the authority of church and state was burned at the stake.
Granted, human civilization has come a long way since then. But the basic building blocks are not terribly different than before.
Anyone who challenges the state is still burned at the stake. And our entire monetary system requires that we all trust the high priests of central banking and economics. Those that stray from the state’s message and spread economic heresy are cast down and vilified.
You may recall the case of Harvard professors Ken Rogoff and Carmen Reinhart who wrote the seminal work: “This Time is Different: Eight Centuries of Financial Folly”.
The book highlighted dozens of shocking historical patterns where once powerful nations accumulated too much debt and entered into terminal decline.
Spain, for example, defaulted on its debt six times between 1500 and 1800, then another seven times in the 19th century alone.
France defaulted on its debt EIGHT times between 1500 and 1800, including on the eve of the French Revolution in 1788. And Greece has defaulted five times since 1800.
The premise of their book was very simple: debt is bad. And when nations rack up too much of it, they get into serious trouble.
This message was not terribly convenient for governments that have racked up unprecedented levels of debt. So critics found some calculation errors in their Excel formulas, and the two professors were very publicly discredited.
Afterwards, it was as if the entire idea of debt being bad simply vanished.
Not to worry, though, the IMF has now stepped up with a work of its own to fill the void.
And surprise, surprise, their new paper “[does] not identify any clear debt threshold above which medium-term growth prospects are dramatically compromised.”
Translation: Keep racking up that debt, boys and girls, it’s nothing but smooth sailing ahead.
But that’s not all. They go much further, suggesting that once a nation reaches VERY HIGH levels of debt, there is even LESS of a correlation between debt and growth.
Clearly this is the problem for Europe and the US: $17 trillion? Pish posh. The economy will really be on fire once the debt hits $20 trillion.
There’s just one minor caveat. The IMF admits that they had to invent a completely different method to arrive to their conclusions, and that “caution should be used in the interpretation of our empirical results.”
But such details are not important.
What is important is that the economic high priests have proven once and for all that there are absolutely no consequences for countries who are deeply in debt.
And rather than pontificate what these people are smoking, we should all fall in line with unquestionable belief and devotion to their supreme wisdom.
February 17, 2014
En route from Buenos Aires, Argentina
On the tail end of my Army career over a decade ago when I was still living in the Land of the Free, I used to be a volunteer for the Big Brothers / Big Sisters program.
If you’ve never heard of it, BBBS is a non-profit that temporarily matches up at-risk youth with responsible mentors in an effort to provide kids with positive role models.
When I first enrolled, the administrators linked me up with a kid from the inner city just hitting his ‘tween’ years. I’ll call him “DJ”.
DJ was great. Despite living in one of the most violent, crime-infested areas of Dallas, he had managed to keep a positive attitude on life. He was always smiling, and polite.
And unlike a lot of kids from his area who aspired to be either drug dealers or professional basketball players, DJ wanted to be in real estate sales.
(I used to encourage this by driving him around on the weekends looking at open houses and property listings, trying to teach him the valuation methods that I had picked up over the years.)
Eventually, life got in the way. My business interests and personal philosophy had always been pulling me overseas. And my father (the primary reason I had been living there to begin with) had passed away after a terrible bout with cancer.
DJ and I saw less and less of each other. And in our periodic phone calls, it became clear that he was changing. For the worse.
By the end of high school, DJ had hooked up with the wrong crowd. The constant influence of other youth had a powerful effect on him. And with a father in prison and his mother barely at home, he quickly got pulled into a darker world.
His entire personality was changing. It was as if he had become a completely different person. Gone was the happy kid with solid, realistic aspirations and a drive to succeed. DJ had become a thug, respecting only violence, ignorance, and wanton cruelty to other human beings.
Right after his 18th birthday he was arrested for a whole slew of felonies– and was just old enough to be tried, convicted, and sentenced as an adult.
The last time I saw him I barely recognized him. It was sad… really ripped me up inside.
This story is far too common; I’m sure many of our readers have been in similar situations, watching people they once cared about descend into a chaotic downward spiral.
I’ve been thinking about this over the past few days during my time in Argentina. Because nations, like people, can enter a downward spiral from which they become completely unrecognizeable.
The Economist recently did a great spread on Argentina, explaining how this country– this city– used to be one of the greatest in the world.
In its heydey, Buenos Aires was considered among the wealthiest, most opulent places in the western hemisphere.
A century ago in 1914, GDP per capita in Argentina was higher than in most of Europe, and its economic growth outpacing even the flourishing United States.
And while the rest of the world blew itself to smithereens in the Great War, Argentina very smartly remained neutral.
By 1918, Argentina was one of the only prosperous, debt-free nations left. And the consequent surge in exports to support all the reconstruction in Europe resulted in a heady economic boom.
But that was then. Today is a different story.
Decades of utterly destructive corruption, debt, and absurd economic centralization have taken an irreversible toll on the country and its economy.
Despite its massive potential, abundant resources, huge population, and culturally-ingrained business prowess, Argentina has become a pitiful shell that continually vaccilates into the the 3rd world.
And people here have had their liberties and livelihoods ravaged by a government that has imposed price controls, capital controls, media controls, and people controls.
They have nationalized private pensions, confiscated private assets, jailed opposition, spawned a currency crisis, and corrupted public institutions.
All of this has devastated a once rich culture. Theft, deceit, and coercion are all now unfortunately pervasive. Crime and malfeasance have become the means of survival for a substantial portion of the population.
Like DJ, this place is hardly recognizable when compared to its former greatness– the result of a long, steady decline punctuated by a sudden collapse.
Regrettably there are a number of ‘rich’ Western nations in this cycle as well. And a great many people are waking up each day with this realization thinking “This is NOT the country that I grew up in…”
But this IS what happens after decades of poor choices: Too much debt. Too much war. Too much money printing. Too much regulation.
Just as people in decline enter a vicious cycle where the consequences of their actions begin to feed on each other, nations too reach a point of no return– a bifurcation point where the decay becomes exponential.
And once they reach this point, the trend becomes a one-way decline where they must first hit rock bottom before being able to climb out.
If you’re not willing to be pulled into that spiral, I’d encourage you to consider your own situation.
If you live, work, bank, invest, own real estate, structure a business, etc. all in the same country… and that country is on an obvious decline that you can feel in your gut, then you are taking serious, serious risks with your livelihood.
The oppressive controls employed by the Argentine government provide the perfect case study of what happens to people who ignore their instincts and trust their politicians.
February 14, 2014
Buenos Aires, Argentina
It’s clear that in today’s world, young people are constantly getting the shaft. Everyone is, really. But in many ways, young people have it the worst.
Youth unemployment rates in ‘rich’ countries are shocking. Abysmal. Young people are the last to be hired and the first to be fired.
It’s young people who will inherit the mountains of debt that their governments have accumulated. And if they’re lucky enough to even find work, young people will spend their entire lives paying progressively higher taxes so that the politicians can make the interest payments.
They’ll also spend their lives supporting reverse demographic pyramids in pension systems around the world. But decades from now when it’s their turn to collect, those pension programs will have run dry.
It’s young people who are expected to go fight, and die if necessary, every time bloodthirsty politicians decide to go to war to protect the bankers’ interests.
It’s an unfortunate position to be in these days: more costs, fewer benefits, and almost no opportunities. The old tried and true method for success– study hard, get a good job, work your way up the ladder– simply no longer applies.
That’s why it’s more important than ever for young people to break free from this system and set their own path. And to do that, it’s imperative to be armed with valuable skills and a network of like-minded colleagues.
Long-time readers know that I sponsor and host an intensive workshop every summer in Lithuania for aspiring young entrepreneurs and freedom-seekers. And this is precisely our aim– to provide young people with valuable skills and a strong network of like-minded people from around the world.
To do this, I bring in some of the most talented and successful entrepreneurs I know. And together, the instructors imbue some of the most valuable business skills we’ve all accumulated through years of making mistakes and grinding it out in the world.
It’s the sort of stuff they just don’t teach in university or business school.
Not to mention, the network has become something truly extraordinary. Each summer we generally have upwards of 30 countries represented, places like the Philippines, Zimbabwe, Colombia, Bulgaria, and more.
For the students, this means forging strong relationships with people from all over the world. This alone is tremendously valuable.
It’s ironic that we’re discussing this today as I have just landed in Argentina– easily one of the most economically distressed places on the planet. As I’ll describe more on Monday, this country is a clear sign of things to come in the developed West.
But despite the overwhelming economic hazards created by politicians and central bankers, I remain unabashedly optimistic about the future. And it is these camps– the opportunity to spend time with so many brilliant young people– that renews my optimism each year.
This liberty and entrepreneurship camp is free to attend. Our charitable organization foots the bill for the whole thing. Students are only expected to get themselves there, and we even occasionally award travel scholarships.
There is a very competitive application process, though. Each year, the initial interest is often in the thousands. Yet we are only able to select about 60 students.
But if you are a motivated young person, or know someone who fits the description, I’d encourage you to check out this page. Learn more about what we do, and sign up to receive instructions on how to apply.