From the Publisher's Desk
January 2008
"There's no art which government sooner learns than that of draining
money from the pockets of the people."
- Adam Smith
US Dollar Armageddon?
Is it Armageddon time for the US dollar? It may be, but one thing is
certain. The US dollar continues its slide to the lowest exchange
rates the dollar has seen in modern times. The US dollar tumbled 12
percent in 2007 alone. Why, what and the reasons for such a decline
is not the subject of this article. The consequences of such a
decline and what you can do about it to protect your loved ones is.
With the US on a path to economic Armageddon, shorn of industry,
dependent on offshore manufactured goods and services, and deprived of
the dollar as reserve currency, the US would become a third world
country. If the dollar loses its reserve currency status, and that is
a very real possibility, the US would magically have to move from an
$800 billion trade deficit to a trade surplus so that the US could
earn enough Euros to pay for its imports of oil and manufactured
goods. That would entail an incredible amount of pain for the
American public that could topple the government with dire
consequences worldwide.
[Editors note: An excellent read on the subject of the Eur vis a
vis the US dollar and other important matters is "The United States Of
Europe: The New Superpower and the End of American Supremacy," by
American author T.R. Reid. This is a sobering read if I say so
myself and is not for the faint hearted. It's available from
Amazon.com for around US$15 in paperback format.]
An interesting tidbit I noticed by pure chance recently that I thought
might be of interest to you dear reader: One of the top US software
sellers on the Internet, who is based in the USA, started pricing
their software in Euros! I believe you will see a lot more of this in
the near future! Do take notice of this.
What will the US government do to avoid such catastrophic scenarios?
Perhaps as some suggest, the US government is deliberately devaluing
the dollar. In any event a glimpse into recent history is a good way
of seeing what may lay ahead for our Yankee and all friends in the
future. And remember dear reader as we have said so many times in the
past, what happens first in Amerika is sure to follow in the rest of
the world, sooner, rather than later!
Gold
Britain went on the gold bullion standard in 1926, which had a
fixed gold price (still GBP4.4.11 1/2d per troy ounce, as in 1717) but
notes were not convertible into gold coin and could be exchanged only
for 400 ounce good delivery bars. Britain went off this standard in
1931 and most European countries followed suit in the early 1930s.
The United States went off gold in March 1933, when private holding
and export were forbidden. Only the export of gold to recognized
central banks and governments was permitted. This created the
dollar-gold exchange standard under which dollars could be traded for
gold at the Federal Reserve. This system was confirmed by the Bretton
Woods Agreement in 1944 and lasted until 1971.
Wage & Price Controls
President Nixon announced on Aug. 15, 1971, "I
am today ordering a freeze on all prices and wages throughout the
United States for a period of 90 days." He threatened that the
controls "will be backed by government sanctions, if necessary."
Most of Nixon's wage and price controls didn't last just 90 days, but
until 1974. The price controls on petroleum lasted until President
Reagan ended them in 1981. Ending the gold standard in 1971 also
meant the country was off the gold standard for the first time since
the American Civil War, and although the gold standard was restored
after that war, America has not gone back on the gold standard since
1971.
Gold hit an all-time high of $850 in January 1980, when investors
bought heavily in the face of high inflation linked to strong oil
prices, Soviet intervention in Afghanistan and the impact of the
Iranian revolution. After adjusting for inflation, that level gold
was equal to $2,079 at 2006 prices.
What today's gold cost? You can see we have a way to go before gold
truly exceeds it January 1980 level of value. Buying gold might be a
good idea, even at what appears to be today's high cost, in order to
retain your wealth and capital.
War and welfare
Nixon's action came after strong inflationary
pressures built up during the 1960s when President Johnson
simultaneously began his Great Society welfare programs and fought the
Vietnam War. Both big programs began the long run of deficit spending
that only ended in the late 1990s - almost 30 years of red ink. A 10
percent income tax surcharge in 1968 made things worse.
Does the above sound familiar? It sure does to me. I personally got
burnt very badly whilst traveling in South America when Nixon took the
US off the gold standard in 1971 and people wouldn't accept my newly
depreciated dollars. Thank goodness I had pounds, lira and Deutsche
marks on me. By the time I returned to base, the several thousand US
dollars I had purchased for my trip had lost 35% of their buying power
from what I paid for them just weeks previously. Ouch!
Inflation
Speaking of marks, the first Mark, known as the Goldmark,
was introduced in 1873. With the outbreak of the First World War, the
Mark was taken off the gold standard. The currency thus became known
as the Papiermark, especially as high inflation, then hyperinflation
occurred and the currency became exclusively made up of paper money.
The Papiermark was replaced by the Rentenmark in late 1923 and the
Reichsmark in 1924.
I recall my father telling me when he was a young lad he heard on the
radio that it took a wheel barrel full of German marks to buy a load
of bread, then two wheel barrels full of marks to buy the same loaf of
bread that same afternoon. People, who were lucky enough to be
working, were getting paid three times a day. The workers' pouses
and friends where there when they got paid so they could run out and
buy food and other products before their pay (money) lost even more of
its value.
You might say that was eighty years ago and such runaway
hyperinflation couldn't possibly happen today. Think again dear
readers. In November 2007 inflation in Zimbabwe for that month hit a
record 8,172%... for just one month. So horrendous inflation rates
have and are continuing to occur even today!
Oil
Let's face it: The era of cheap oil is dead: $100 a barrel is
here! Oil appears to be going up drastically as I pen these words.
However the fact of the matter is that the USD is going down. So in
order for the oil producing countries to maintain the price of a
barrel of oil, the price, which is based in US dollars, has to be
increased. The average American doesn't understand this and they have
no one but the US government to thank for this ongoing scam.
The oil embargo, circa 1973, caused a barrel of oil to skyrocket. Do
understand that when a barrel of oil surpassed US$90 a barrel, it
surpassed its all time high (in today's dollars,) from the 1970's.
Since that has already occurred, I believe we are going to have a very
serious recession or worse, and possibly a US dollar meltdown like
what occurred in 1973 after that oil debacle caused a very serious
recession indeed. This scenario is very real and indeed inevitable. It's like the Titanic after having struck an iceberg. Its designer,
Thomas Andrews, said: "It's a mathematical certainty the ship will
sink."
A worthwhile read is "Oil Price History and Analysis" at
http://www.wtrg.com/prices.htm
For our American readers who think the cost of petrol
(gasoline) is too high in the USA, think again. In not so Great
Britain a liter of petrol is more than one pound or US$2.00 per
liter, i.e. approximately US$10 per US gallon! It's even much higher
in other countries!
Where is this heading? Is the US and other countries heading in any
or all of the above directions? Your guess is as good as mine.
However any intelligent person should recognize that the US, the US
dollar and the world economy is in very deep doo doo.
Recently the biggest act of international monetary intervention since
the Sept. 11 terrorist attacks by the central banks of all major
countries occurred. See http://www.bloomberg.com/apps/news?pid=20601102&sid=axUS.CgJ4LpA&refer=uk
Aside from the above, for this I am certain: The US and other
governments will do everything in their power to avoid any type of
meltdown scenario and YOU are going to pay for it.
Case History
I will never forget one Safari trip I went on some time
back. We were in Victoria Falls, Zimbabwe and met a very nice
Zimbabwean couple of Greek ancestry. They had inherited a thriving
business from their parents and grandparents before them who had come
to Rhodesia, as it was called previously, some 100 years ago and
started and operated what became a very successful business in
Salisbury, now called Harare, the capital.
At dinner one evening near Victoria Falls, we discussed the Zimbabwe
dollar crashing that day, going from two Zim dollars to one USD, to
ten Zim dollars for one USD. The Zim couple was devastated as their
wealth was devalued accordingly. Their business and life savings were
clearly at risk as they could be cleaned out at the whiff of the
government at any time.
I suggested they get the rest of their capital and cash out of
Zimbabwe immediately before it got worse. They replied with words to
the effect that "it is against the law to remit funds out of Zimbabwe,
and besides they believed that matters there would get better."
That was ten years ago! Needless to say since then, Zimbabwe has gone
to hell in a hand basket. There's no food, no fuel, etc., and people,
especially the poor, are starving to death. The exchange rate in
early December 2007 was 30,655 Zimbabwe Dollar to one USD!
I would venture a guess that the lovely couple I met some ten years
have been completely wiped out and are stuck in a living hell having
lost their grandparents business and life savings, which all could
have been avoided had they heeded the warning signs and taken my very
good advice. In retrospect I was totally correct I am sad to say.
Real Estate
The US, UK and a few other western countries are presently
experiencing an unprecedented meltdown in real estate. US
foreclosures are at an all time high. American and other banks have
been hit with real estate losses well into the tens, if not hundreds
of billions of dollars, with the worse yet to come! UBS (think
Switzerland) and the mighty US' Citibank have taken tens of billions
of dollars in losses due to this debacle. And it is only just
starting! Both banks have been forced to sell off their assets
(shares,) to several United Arab Emirate countries, as well as to the
government of Singapore, which paid 11bn US Dollars for a good size
number of UBS' shares. I wouldn't be surprised to see these once
great banking institutions taken over by foreign government in the not
too distant future!
I was watching a Bloomberg news report during the holidays and was
shocked when they reported that the USA alone had experienced a 1.2
trillion, (read that TRILLION) loss in home equity values during
November 2007. That is an unprecedented sum of wealth which is
certain to cause considerable consternation for many an American and
businessman, especially bankers. Something is amiss and the doo doo
is certain to hit the fan shortly.
Reporting
Americans are required under penalty, to report ALL funds,
bank accounts and assets offshore on their tax returns. That is all
assets with the sole exception of life insurance and real estate.
Historically more Americans have made more money in real estate than
any other investment. Real estate has retained its value, mostly,
over many years. The right type of real estate outside of America
might be a life saver, financially as well as physically for you and
you're loved ones. You could retain a good portion of your capital
whilst having a safe haven to go to in times of turmoil. As the great
American humorist & writer Will Rogers said; "Buy land, they ain' t
making more of it!"
In the event of a dollar meltdown, the government would most likely
take all kinds of draconian measures to save you from yourself.
[Editors note: See Note 1 below: MORTGAGE MELTDOWN]
For example;
* Placing wage and price controls placed into law
* Implementing exchange controls that might outlaw citizens from
having assets OUTSIDE your country
* Demanding that all citizens and residents repatriate their
financial assets back to Amerika (or your country) under dire
penalty!
* Forbidding you from owning gold
* Limiting you from traveling abroad. This could be accomplished
via limiting the amount of funds one could "take out of the country."
[Note: The UK did this very successfully in the mid 1960's. So don't
think the US, the UK or you're country wouldn't do this if push came
to shove!]
* Plus throw in everything else you can dream of that the
Terrocrats would cook up in order to save their ass and steal your
assets to keep their shill game going.
Don't think any of the above could happen? Think again because it has
happened previously in the US and elsewhere and there is certainly a
real possibility of any one of the above or more happening again.
Reporting requirements are dangerous to your health! With the type of
reporting available worldwide nowadays, it is most likely that your
offshore assets are already known to, or will be made known to the US
authorities in a short period of time, assuming you haven't already
'voluntarily' reported them.
Not so long ago our British friends had severe exchange controls
placed on them in order to "keep them in the UK." I know because
we personally experienced this stupidity from the government's nonsense.
Whilst traveling to France on summer holiday, we were only allowed 50
quid (fifty pounds) to take out of the country and there weren't any
credit cards back in those days. Our French hosts felt so bad for us,
they refused to accept any money from us. I've never forgotten that
kindest and am always ready to reciprocate with French friends and
associates.
Try traveling abroad with just $1,000 today for ALL your expenses,
including charges on your credit card. You certainly wouldn't get
very far would you? This would be, could be an extremely efficient
way for your government to "keep you in Amerika, the UK or elsewhere,"
wouldn't it?
More on Gold
Since leaving gold, there have been several attempts to
peg the value of the (UK) pound to other currencies, initially the
U.S. dollar.
Under continuing economic pressure, and despite months of denials that
it would do so, on 19 September 1949, the government devalued the
pound by 30%, from US$4 to US$2.80. The move prompted several other
governments to devalue against the dollar too, including Australia,
Denmark, Ireland, Egypt, India, Israel, New Zealand, Norway and South
Africa.
In the mid-1960s the pound came under renewed pressure since the
exchange rate against the dollar was considered too high. In the
summer of 1966, with the value of the pound falling in the currency
markets, exchange controls were tightened by the Wilson government.
Among the measures, tourists were banned from taking more than GBP 50
out of the country, until the restriction was lifted in 1970. The
pound was eventually devalued by 14.3% to US$2.41 on 18 November 1967.
In 1979 the Conservative government of Margaret Thatcher lifted
Britain's exchange controls. Investing institutions no longer risked
penalties for investing overseas and capital flooded out of the
country. Today, as a result of that move, Britain is the world's
second largest creditor nation - only Japan is larger.
So my American readers don't think for a moment that your government
wouldn't do such things as price controls and restrictions on taking
money out of the country. The UK government has, and your government
could. Never forget that and govern yourself accordingly.
Good News
However there is good news for everyone. For Americans and
others owning real estate offshore, currently it is not reportable.
In the event the US or other governments demanded (under penalty) that
you do report such types of assets (real estate,) you could hardly
repatriate your real estate assets back to the USA could you? After
all how could the US demand that you bring your home in Costa Rica,
lot in the Bahamas or flat (condo) in London back to the good ole USA?
Holding offshore real estate via a Panama or other bearer trust would
be an ideal way of owning real estate abroad, whilst maintaining your
anonymity!
As our long time readers know, we've been complaining about the high
cost of real estate worldwide for years. Prices in London are
astronomical and frankly IMHO grossly overpriced. However there are
signs that the crack in overpriced London real estate has started.
Prices are down 5% in one month and the experts expect prices to drop
much further. When they drop 50% from today's overpriced values, we'll
be buying into the central London "depressed" real estate market.
That's what we did during the 1989 London real estate crash and that's
what we're prepared to do again, but only when the time is right and
the depressed values offer a real estate bargain. Remember buy when
everyone is selling and sell when everyone is buying is the age old
adage and very sound investment advice indeed.
Editor's note: You can download a FREE report on 14 jurisdictions'
offering bearer share companies, bank accounts and other structures.
Download your FREE copy at http://www.ptshamrock.com/14_co.pdf
Safe deposit Box
Americans and others having a safe deposit box (not a
bank account,) in a solid bank in Switzerland is NOT a reportable
requirement, at least not as of this writing. Having cash in that
safe deposit box might also offer additional safety, albeit this is a
gray area for our Yankee friends. I'd suggest having a bearer share
company own the safe deposit box to afford you maximum privacy. In
addition owning physical gold held in a Swiss safe deposit box might
be a good bet for many. Having a few ATM cards loaded and denominated
in Euro's, Swiss Francs or Hong Kong $ could be a life saver as well.
Naturally having a passport from your home country and possibly a
second or third passport from other countries makes good sense to me.
Not only could that second or third passport save your life and that
of your family, but it could save your assets and your freedom of
movement.
Ass and Asset Protection
Basically that is what the UK exchange
controls did in 1966; they restricted the movement of Britons from
traveling abroad by forbidding anyone from taking more than GBP 50 out
of the country. What kind of holiday could our Yankee friends take
for a family of four with US$500 or a US$1,000 today in the states,
let alone OUTSIDE of the USA? That is the surest and easiest way for
your government to restrict your freedom of movement outside your
country of residence, isn't it? And I sincerely believe this is a
very real scenario if the dollar melts down.
The US authorities are already tracking EVERYONE, US and non US
citizens' alike, traveling inside, into and out of the USA today. The
databases for going so are mind boggling. According to a reliable
source, the US federal government alone has more than 138,500 such
databases and they are currently growing at a rate of around 1% every
quarter. This is an awesome number of databases with hundreds of
trillions of terabytes of information on your every move. This
includes your financial, physical and other movements including but
not limited to which books you read, how you pay for one product,
service or another, your preference of travel, whether you have a meat
or a veggie meal on flights and your aisle or window seat assignment
preference! And these figures don't include state or local agencies
either. That's a very sobering thought if you are to think about it
for a while.
Whilst on holiday recently, I watched a comedy television show. I
don't remember the name of the program, but there was a skit where a
young Australian or Brit was traveling to the USA. Arriving at US
immigration the young man was required to have his eyes scanned, then
have his ten fingers fingerprinted. After wiping his fingers clean
and just when he thought he was finished, the US (woman,) immigration
official said; "Sir please come over here and have your ass print
taken." The shocked visitor proceeded to the "ass print machine"
pulled his pants down and sat on a large ink pad. After having his
ass "inked, he proceeded to a large piece of white paper where another
US immigration official with white gloves on proceeded to take his ass
print, all the time whilst others waiting in queue looked on.
Finally having reached his limit he told the immigration officials, "to hell with your visitor requirements, I'm out of here and returning
home." With the Australian/Brit visitor leaving in a huff, the US
lady immigration official held up a small cup and yelled "But sir, all
we need is your stool sample and you're though here!"
It was a hysterical and ridiculous skit, but somewhat prolific. The
fact of the matter is whilst this US TV comedy show is a laughing
matter showing how ridiculous the US government has gotten, how far
are the Terrocrats from actually starting such nonsense?
You Are What You Write
U.S. law has long required a search warrant to
open first-class mail unless postal inspectors suspect it contains
something dangerous, like a bomb, or contraband like narcotics. But
last December, President Bush quietly asserted a new government
prerogative to open domestic mail without a warrant, probable cause,
or even suspicion that it contains dangerous materials or contraband.
Bush did this through a mechanism known as a "signing statement."
This is a statement issued when a bill is signed into law, stipulating
that the president has the authority to ignore certain of its
provisions. Bush has issued at least 750 signing statements during
his presidency, more than all other presidents combined.
The last time the U.S. government had a widespread mail-opening
program was in the 1970s, at the height of the Vietnam War. During
this period, U.S. intelligence services became highly proficient at
opening mail and then resealing it without the recipient ever being
the wiser. And that was 30 years ago. It's hardly unreasonable to
suspect that today's surreptitious mail opening techniques are even
less detectable.
Permission to Travel
Finally, there's the internal passport. In a "free" country like the United States, it would never do to issue such
an obvious reminder of government oppression. People might complain.
Even the Fox Network might start complaining about your eroding civil
liberties. Once again, though, the U.S. government came up with a
much more subtle, high-tech, replacement for the internal passport.
It's called the "Advance Passenger Information System" (APIS).
With the APIS, you'll need to obtain permission from the
Transportation Security Administration to travel on any commercial
airliner or ship that goes to or from the United States. Until APIS
clears you, you won't receive your boarding pass. You'll also need
permission to travel through the United States (e.g., if you're
changing planes at a U.S. airport on a trip between two foreign
countries).
Naturally, the entire process - for both domestic and international
travel - will occur in total secrecy. If you're denied permission to
travel, you won't be able to appeal the decision to any court. Your
only recourse will be through the TSA bureaucracy.
Adios machos Yankees!
A 1999 U.S. State Department survey suggested
4.1 million Americans lived overseas. Every year, about 250,000 U.S.
citizens and resident aliens leave America to make a new home in some
other nation.
In 2005, the U.S. Bureau of the Census upped this estimate. They
guessed that over 350,000 U.S. citizens and resident aliens would
leave the United States permanently. Many of these emigrants are
wealthy people who want to escape what they see as the excessive taxes
and political tyranny of the United States government.
John Gaver of Action America.org notes: "The problem is that
increasingly, the wealthy perceive that they are under attack by their
own government and they are taking the only rational option left open
to them. They're taking their wealth and leaving.
Maybe it's time for you to do likewise?
See you next issue
Shamrock
"The people never give up their liberties but under some delusion."
- Edmund Burke, 1784
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