War Is a Certainty

by Jeff Thomas

Recently, an associate offered the following observation with regard to the likelihood of war in the immediate future:

“The big guys like to play chess with the world. It's the biggest game. The bankers need ups and downs and wars to make money. The military needs wars to exist. The politicians need both to exist.”

Whilst he was reiterating a concept we have discussed on many occasions, it occurred to me that I have never seen the subject defined so succinctly, nor so informatively.

Let’s break it down:

The bankers need ups and downs and wars to make money

Just as bankers increase their profit as a result of upward and downward economic fluctuations, so, too, do they benefit from war. It is not unusual for a given bank to finance those who would create armed conflict, and indeed, they sometimes bankroll both sides. Whilst banks have other means of making money, war is often more profitable than conventional banking.

The military needs war

The military-industrial complex is in the business of selling armaments to governments. Although armament sales may tick over nicely in peace time, they boom in war time. Therefore, any armament supplier will benefit from war. It matters little whether it is an all-out war or a series of smaller ventures. The object is sales.

The politicians need both banks and war

This is true in the sense that politicians need both bankers and an active military to thrive. Political campaigns depend upon funding. Banks and armament suppliers have long been a major source of campaign funds for candidates of the primary political parties. (If each party is well-paid before the election, favourable treatment towards banks and armament suppliers is assured, regardless of which party wins an election.)

But there is further necessity for armed conflict with regard to politicians. First, it is a truism that a country rarely changes leaders during times of war, and nothing is more imperative to the politician than gaining a further term of office.

Second, nothing distracts the voting public like war. If a politician is receiving increased criticism from the voters, a good war can be counted on to get the voters concentrating more on the war than on the politician’s poor stewardship.

Third, governments typically remove the freedoms of a populace over time. Whilst citizens may object to the loss of their freedoms in normal times, they are often more willing to relinquish them “temporarily” in times of war, “for the good of the country.” Not surprisingly, lost freedoms are seldom reinstated after a war.

Consider the words of James Madison, the fourth US President:

“Of all the enemies of public liberty, war is, perhaps, the most to be dreaded, because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes; and armies and debts and taxes are the known instruments for bringing the many under the dominion of the few. In war, too, the discretionary power of the Executive is extended…. No nation could preserve its freedom in the midst of continual warfare.”

Generally speaking, the citizens of most countries would prefer to avoid war. After all, they rarely benefit from it. But then, the impetus for war is almost never generated by the people of a country. Unless a nation is actually attacked, in nearly every case, the people need to be talked into going to war.

Convincing the People

A good example of this is the US, who, since World War I, have needed convincing on almost every occasion when political leaders proposed war. In World War I, the Lusitania incident was created jointly by the UK and the US to motivate them. In World War II, the goading of Japan was needed. In Vietnam, the trumped-up Gulf of Tonkin incident was needed, and so on.

Suffice to say that, when bankers, the military industrial complex, the politicians, or all three decide to instigate war, war will come to pass. Whether it is a conservative government or a liberal government, if a clear threat does not exist, one will be invented.

As Hermann Goering stated in the Nuremburg trials,

“Naturally, the common people don’t want war. But after all, it is the leaders of a country who determine the policy, and it is always a simple matter to drag people along, whether it is a democracy or a fascist dictatorship, or a parliament, or a communist dictatorship. Voice or no voice, the people can always be brought to the bidding of the leaders. This is easy. All you have to do is tell them they are being attacked, and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same in every country.”

At the present time in history, the countries of the First World have created the greatest pillaging of the state coffers that has ever occurred. As complacent as the peoples of both the EU and the US have been in recent decades, there does seem to be a growing understanding amongst the peoples that they have been scammed.

Aside from continuing quantitative easing until that scam also fails, the respective governments are running out of rabbits to pull out of the hat to distract the masses. It would therefore seem that there has been no time in history in which war was so needed by national leaders—both as a distraction to the populace and as a last squeeze at the monetary lemon, prior to the inevitable crash.

And so, what does that mean to the reader? Assuming he is not invited to take part, shouldn’t the drums of war be of little interest to him? Well, in terms of his own physical safety, that may well be true, but here is an historical fact to consider:

Any country that is considering waging war against another country should first consider that the loser is almost always the country that runs out of money first.

No venture is more costly than warfare. The EU and the US are bankrupt now. Those presently living in those locales may escape actual duty in the military, but they will unquestionably be expected to pick up the tab through taxation.

Those who presently feel that their obligations to their governments are already barely manageable might wish to consider what they will be, both during and after a major war.

Source: International Man

Follow us on Twitter: @blacklioncm

A Primer on Internationalization

by Nick Giambruno, Senior Editor

“The problem—your problem—is that any country can turn into a 1970s Rhodesia. Or a Russia in the ‘20s, Germany in the ‘30s, China in the ‘40s, Cuba in the ‘50s, the Congo in the ‘60s, Vietnam in the ‘70s, Afghanistan in the ‘80s, Bosnia in the ‘90s. These are just examples off the top of my head. Only a fool tries to survive by acting like a vegetable, staying rooted to one place, when the political and economic climate changes for the worse.”

~Doug Casey

So, why is international diversification prudent?

Most people know of the general investment benefits of not having all your asset eggs in one basket. This portfolio-diversification concept—investing in multiple asset classes—also applies to the political risk associated with your home country. It is a risk few people think about diversifying.

Doug Casey has said over and over that spreading your political risk beyond a single jurisdiction is the single most important thing he can recommend today. And I wholeheartedly agree.

In short, it's prudent because it frees you from absolute dependence on any one country. Achieve that freedom, and it becomes very difficult for any country to control you.

While diversifying political risk is something that everyone in the world should strive to achieve, it goes double for those who live under a government that is sinking deeper into fiscal trouble (e.g., most Western governments).

To get started, there are four core areas to consider: your savings, yourself, your income, and your digital presence.

Internationalize Your Savings

Placing some purchasing power beyond the immediate and easy reach of your home government protects against your wealth being trapped in the country should capital controls be declared, or from outright asset seizure that can strike without warning.

Internationalizing your savings can happen several ways: foreign financial accounts; physical gold held abroad; structures like an international trust; and foreign real estate.

Foreign real estate can be especially helpful. I have described it as an “internationalization grand slam,” because it can accomplish a number of key goals all at once.

First, owning real estate in a foreign country (ideally one where you would enjoy living) moves a good chunk of purchasing power into a hard asset outside the immediate reach of your home government. Unlike an intangible financial account, it's highly unlikely that your foreign real estate can be seized in a flash by your home country, without an act of war.

Second, a purchase of foreign real estate can often open up other internationalization options. In most cases, owning property is a valid justification to have a bank account in a foreign country, something that is increasingly difficult for Americans to do. Generally speaking, owning foreign real estate usually puts you on the road to legal residency, and possibly a shortened path to citizenship.

Last, owning foreign real estate can reward you with a second home, a vacation hideaway or place to retire, and an emergency “bolt-hole” always at the ready, should you need to escape trouble back home.

Internationalize Yourself

Unfortunately, there are no solutions to a second passport that are at the same time easy, fast, legitimate, and cheap. But that does not lessen the need to have one.

Unless you plan to live as a permanent traveler, which most people cannot do, you'll need to secure the legal right to live and work in another country. This is where a second passport or, to a lesser degree, legal residency in a foreign country can be useful. A second passport can also greatly expand the number and type of foreign financial accounts available to you.

Any government has the ability to revoke the citizenship and/or passport of its citizens at a moment’s notice under any pretext that it finds convenient. Neither your passport nor your citizenship actually belongs to you. It belongs to the government. Just look at how the US canceled Edward Snowden’s passport by fiat. That was not an aberration. Having a second passport means that you can always escape your home country without having to live like a refugee.

Internationalize Your Income

Internationalizing your income includes structuring your cash flows to reduce dependence on any one source in any one jurisdiction. The goal is to create additional sources of revenue from international investment opportunities and trends, and to orchestrate it with an offshore company domiciled in a favorable jurisdiction.

Internationalize Your Digital Presence

This commonly includes your IP address (which can often pinpoint you to a precise physical address), email account, online file storage, and the components of personal/business websites. 

Conclusion

It's only prudent and logical to assume that you will, somehow and someway, continue to be squeezed harder in the pocketbook and subjected to escalating, arbitrary, and burdensome regulations and restrictions. In short, expect more government and less freedom all around.

The window to protect yourself from these risks by diversifying internationally verifiably closes a bit more with each passing week. There are many ways that you can begin to diversify that do not require you to leave your home country, or even your living room. 

However, it is essential that you develop the options to internationalize before the government closes the window of opportunity to do so. If history is any guide, it won’t be open forever.

In that sense, it's much better to have developed and implemented many parts of your game plan a year early rather than a minute late.

International diversification is a time-tested strategy to protect you from desperate and out-of-control governments.

Wealthy people around the world have used it for centuries to effectively protect their assets and themselves. And thanks to modern technology and a more globalized world, anyone can implement similar strategies.

Source: International Man

Follow us on Twitter: @blacklioncm

There Is a Rogue Elephant in Your House

Doug Casey: “There Is a Rogue Elephant in Your House”

by Doug Casey

One time when I was in Burma (now Myanmar), I spent a couple of days riding around the forest by elephant back. Elephants are a fine thing to have in the forest but, believe it or not, you have one living in your house with you. And you should do something about it now, before your house is wrecked and you and your family get stomped in the process.

Any amount of financial success won’t mean much if you get stepped on by the elephant in the room. The damage you routinely suffer from the elephant—not to mention the lingering threat that he’ll go completely berserk someday—dwarfs the importance of the best investment decision you’ll ever make. So, I’m going to invite your attention to a problem of overriding importance: How can you protect yourself and your wealth from the elephant?

The elephant in the room is, of course, the government.

The elephant is your permanent roommate, and it has a permanently big appetite. In the name of “income tax,” it regularly eats 40% or so of everything you earn. You may not like it, but by now you’ve probably learned to live with it.

After you’ve lived out your income-tax paying years, the elephant will attend your funeral—not to console the mourners or to recount your good deeds, but to collect estate tax. In the name of the “estate tax,” the government will take up to 40% of what you leave for the next generation and perhaps more of what you leave for your grandchildren.

It’s not the kind of roommate you’d advertise for. In fact, if you add things up, government probably is the most expensive disaster you’ll ever suffer. Almost every year, you lose more to it in taxes than you lose on your worst investments. And unless you’re a champion crime victim, you’ll lose less to a lifetime’s worth of burglars, bandits, muggers, and con men than your estate will lose to the tax collector… if you don’t do something about it.

Most successful people respond to the elephant by trying harder—working harder, working smarter, and earning enough to live well on what the elephant doesn’t eat. They’re like the farmer who plants enough to have a good harvest even after the bugs have taken their share. This is a workable solution, up to a point. But it won’t work at all if the elephant decides to take everything.

The idea of losing everything is literally unthinkable for many people. It is so far outside the range of their experience that all they can do with the idea is to reject it as not worth considering. Unfortunately, this also means rejecting all the opportunities for protection—just as many Titanic passengers shunned the early invitations to a lifeboat.

But the danger of a total wealth wipeout doesn’t go away. Some people do in fact lose everything to the elephant. In a few cases, it happens through seizures. A government agency points to an individual, calls him a bad name (drug trafficker, money launderer, polluter, racketeer, or tax evader), and takes everything the target owns. The target may not even have enough money left to hire a lawyer to help recover a portion of what he’s lost.

More commonly, it’s a lawsuit that takes everything a person has. The judge hears a story. The judge likes the story. The judge orders the defendant to give the plaintiff everything the defendant owns. Then the plaintiff wonders why a seat in the lifeboat seemed so uncongenial.

Perfect Protection

The best protection you can have from the elephant is not to own anything. What you don’t own can’t be taken from you by a tax collector, by a government agency, by a results-oriented judge, or by anyone else. You don’t want to be poor, obviously. But there’s a strategy that lets you have it both ways—the safety of not owning anything and the benefits of being wealthy. You can have it both ways by transferring your assets into an institution in another country that will return them to you (or family members) only when you want them back.

That’s the essence of an international trust. It puts just enough distance between you and your assets that the assets can’t be taken from you. But it makes those assets available to you when you want them. An international trust needs to be designed in just the right way. It mustn’t leave you with any rights that a local court or government agency might try to take away from you; and it mustn’t leave you with any powers you could be forced to use against your wishes. On the other hand, the trust must give you emphatic assurance that the trustee will never lose sight of your real objectives—otherwise you’re not going to use it.

Here’s an outline of how an international trust protects you from the elephant:

1. You are the grantor of the trust—the person who transfers legal title to selected assets to the trustee.

2. The trustee is a bank or trust company in a country with no income or estate taxes and a legal system that won’t tolerate a US-style litigation explosion. The trustee takes legal responsibility for the safekeeping of trust property and applying it for your purposes.

3. You and everyone else you care to include are the beneficiaries—the persons who are eligible to receive cash distributions or other benefits from the trust. You can include family members (including descendants who haven’t been born yet), or anyone else.

4. You are the protector of the trust. As protector, you have the legal power to monitor the trustee’s performance and the power to replace it with another institution if needed. You also have the power to name your successor as protector—so that the trust will continue to have a protector even after your lifetime.

The relationship among the participants is spelled out in a written trust agreement. Two provisions are essential to getting maximum protection. First, the trust should be irrevocable. If it isn’t, then anyone can undo your trust simply by forcing you to revoke it.

Second, the trust should be discretionary. “Discretionary” means that no one beneficiary owns a particular share of the trust. Instead, each beneficiary receives what the trustee, in its discretion, decides to give the beneficiary. With a discretionary trust, no beneficiary owns anything he can be forced to assign to a judgment creditor or tax collector. And a discretionary trust makes it impossible for any tax collector to attribute the trust’s income to a beneficiary.

These two key features—irrevocable and discretionary—are both powerful and cautionary. They are powerful in that they put up a wall around your assets that the elephant can’t knock down. The elephant can’t reach trust assets directly, because they’re held by an institution offshore, where US courts and government agencies have no jurisdiction or power to enforce a judgment. And it can’t reach them through you because you don’t have the power to get them back without the consent of the trustee. You can do or sign whatever you’re ordered to and still be confident that your wealth is protected.

But that same power is a source of caution. How can you be confident that the trustee will use the discretionary authority you’ve given it in the right way? How can you be confident that the trustee will send you a check when you need it? You get that confidence by being the protector.

The trust agreement should give you, the protector, the power to replace the trustee with another institution of your liking—in other words, you should have the power to fire the trustee.

Two other features should be included to ensure that the trustee uses its discretionary authority correctly. First, the trustee should be obligated to consider all the advice it gets from the protector. Second, the trustee should be absolved of liability for decisions it makes based on the protector’s advice. Together with the power to fire the trustee, these provisions give the protector all the influence he needs.

Using an international trust for lawsuit protection and tax savings doesn’t interfere with your freedom to make investment decisions. If you want, the trustee can open a brokerage account for your trust anywhere in the world and appoint you as the trading advisor. You continue to give the buy and sell orders. Or you can ask the trustee to hire a particular investment manager for your trust. Or you can keep complete management control by using a limited partnership. You transfer the real estate, business, or investments you want to protect to a limited partnership and then transfer the limited partnership interest to the trust. As general partner, you would still make the day-to-day investment and management decisions, but the value of the assets is protected by the trust.

The biggest, simplest benefit of an international trust is lawsuit protection. You can’t be forced to hand your assets over to the winner of a lawsuit (or to any other creditor), because you no longer own them. The trustee is the legal owner. Anyone who hopes to reach those assets must bear the expense and bad odds of legal action in another country. Provided you’ve selected the right country for your trust and assuming that you were solvent when you funded it, his prospects are extremely dim.

Plaintiffs’ lawyers know how difficult it is to break into a properly established international trust. As a result, having your assets protected by an international trust means that litigation against you never gets started or gets settled on terms that are extremely favorable for you.

Income tax savings for yourself aren’t automatic. They depend on how your trust investments are structured. This is a complex topic, but the summary is short: Merely transferring assets to an international trust won’t achieve any income tax savings in your lifetime.

For future generations, the income tax consequences of an international trust are far more dramatic. The trust will have no ties to the US tax system. It can be used to accumulate and compound investment returns free of current income tax. Future generations will face no tax on the profits until they spend them. Even then much of what they take from the trust can come to them free of income tax. An international trust allows you to pursue any type of estate plan you want (or none at all). You can do all the conventional things you’re likely to hear about if you visit an estate planner, and also do some other things that wouldn’t be possible without going international. For example, with an international trust, you can get property out of your estate and still be eligible to receive the money back for your own support if you later find that you need it. This frees you to act aggressively to reduce your taxable estate without the fear of planning yourself into the poorhouse.

The biggest estate-planning advantage is finality. The wealth you leave in an international trust disconnects from the US tax system. It will never be included in the taxable estate of any future generation. For your family, estate tax comes to an end. The elephant will have to dine elsewhere.

Previously, getting the protection of an international trust demanded so much effort and expense that almost no one did it. But now an international trust is cheap and easy to use.

Doug Casey

Source: International Man

Follow us on Twitter: @blacklioncm

A Few Radical Ideas About Wealth

By Doug Casey, Chairman, Casey Research 

Friday, September 9, 2011

Now that more than 45 million Americans receive food stamps … and over half receive more in government benefits than they pay in taxes, it's clear things have gone horribly wrong in this country's attitude toward wealth.

I've spent a considerable amount of time thinking about wealth. Over the years, I've developed some radical ideas on wealth. You may find them valuable.

Mind you, these ideas weren't radical 200 years ago… But they are considered radical now. That's why it's important to keep them in mind. In the financial crisis I see coming, the right ideas might mean your life.

First, recognize that wealth is a high moral good. 

Don't feel guilty about having it or about wanting more.

If you've already accumulated and deployed enough capital to allow you to jump off the golden treadmill, congratulations: chances are high that you are an exceptional human being. I say that because the moral value of being wealthy is underrated. I don't mean that in a Calvinistic way, in that Calvin believed Yahweh rewarded the righteous by making them rich. But I do believe that productive people – people who work hard to provide goods and services for others – definitely tend to be wealthier than unproductive people. They deserve to be.

And since we don't live in a malevolent universe, people generally get what they deserve. So, yes, wealth is definitely one indicator of moral excellence.

Sure, some wealthy people got that way by lying, cheating, and stealing. But they're exceptions. It's much easier to become wealthy if (in addition to having virtues like diligence, competence, and judgment) you are known to be truthful and honest. Those who automatically think ill of the rich are, at best, paranoid fools. Put it this way: Rich people may lack some virtues, but they definitely have at least a few that made them rich. Poor people, on the other hand, will certainly lack some virtues, and they'll definitely have some vices that kept them poor.

I'm a fan of some aspects of Gurdjieff, the late-19th to mid-20th century Russian mystic, who was also a merchant adventurer at some points in his colorful life. He said that anyone who successfully employed at least 20 other people must be considered at least partially enlightened and a type of guru. That viewpoint always resonated with me. Self-made wealthy people may not be saints or mystics or intellectuals or even especially thoughtful or moral. But they've proven they're better than the average bear in at least one important way: they can create and conserve wealth. And they've thereby eased everyone's path to further accomplishments.

Second, figure out your purpose in having money. 

Sure, money makes life easier. And it's nice how it enables you to assist people you like with material things. But I strongly suggest that you not take too short a view on this matter.

Accelerating advances in medical science are not only lengthening human life expectancy, but new developments now in the works have the potential to vastly improve your capability and health, as well.

Is it possible to live to age 200, with all the wealth, knowledge, and wisdom that implies, while maintaining the body of a 30-year-old? Not yet. But the prospect is on the horizon. It will, however, be available only to those who can afford it.

Ray Kurzweil makes a case that the Singularity is near, and I buy his reasoning. It would be tragic indeed if anyone frittered away his wealth, thinking he wouldn't live very long, and then succumbed to a self-fulfilling prophecy, not because of medical difficulties, but because of financial difficulties.

Third, don't give your money to charity. 

Entirely apart from showing a lack of both imagination and foresight, it's a complete waste of good money, pure and simple. Contrary to popular opinion, it rarely does any good. It often does great harm. Here's an interview I gave on this subject.

The whole concept of charitable giving is corrupt and desperately in need of a complete rethinking.

Fourth, if you do care about posterity (who knows, you might be reincarnated), and on the chance you don't make it to the Singularity,carefully consider how to dispose of your estate. 

For one thing, there's no reason to automatically leave anything to your children – unless they deserve it. The notion that someone should inherit just because he shares your genes is flawed and thoughtless. The example of Marcus Aurelius leaving the Roman Empire to his worthless son, Commodus, should be instructive. Wealth should be left to someone who is most capable of increasing it – at least if you want to benefit humanity in general. And, yes, I'm quite aware that humanity in general may deserve absolutely nothing.

At a minimum, consider that memes are far more important than genes. It's wiser, therefore, to leave your wealth only to individuals (related to you or not) who will carry forth values you hold dear and are worthy of the wealth. If nothing else, make sure you disinherit the government.

Also consider that dividing wealth dissipates it and generally makes it less useful. If you have $1 million, you could leave $1,000 to each of 1,000 people. But apart from the fact that it's unlikely anyone knows 1,000 worthy people, that much money is only enough for a modest vacation or a few baubles.

The larger the pool of capital, the more ways it can be used, the more creative power it has, and the more likely it will be conserved and used creatively. I favor the Roman system, in which one could adopt children of any age – but always after you could see what their character was. You might want to do that if your own kids don't make the grade.

The bottom line is, if you want serious money, you have to get serious about money. You need to understand these fundamentals and never forget them. Don't let all the garbage reported in the financial media you read, see or hear confuse you about what money really is. Don't consume more than you make: save! Don't spend: invest!

Again, these are radical ideas in today's America, where bailouts and handouts are desired and expected. But these are timeless rules of wealth… and they always will be.

Regards,

Doug Casey

Source: Daily Wealth