by Nick Giambruno, Senior Editor of International Man
What is the worst law that most Americans have never even heard of?
There are plenty to be sure. So many mundane activities are now criminalized that the average American unknowingly commits three felonies a day. But in this case, I am referring to FATCA, which most Americans have never heard of (though regular IM readers should be familiar with it by now).
In case you are not familiar with FATCA, it is a US law that forces every foreign financial institution in the world to provide the IRS with information on their American clients. It is hugely burdensome and costly to comply with. It has had the effect of making the vast majority of foreign banks, brokerages, and other financial institutions shun American clients, effectively making it much more difficult to move capital outside of the US. Taken together with other costly extra-territorial US regulations, FATCA amounts to a sort of de facto capital control for American citizens.
Anyway, the reason I am bringing up FATCA (you can read more about it here) is that it helps to reveal something important.
History has shown that the destructive measures a government usually takes follows a certain order of progression as it becomes more desperate. The steps are detailed in the desperate government countdown below. FATCA helps reveal how far along the US is at the moment.
The purpose here is to simply understand the general pattern that nations follow as their fiscal situations deteriorate… and see what pragmatic steps we can take to protect ourselves.
1. Fiscal health of the country is clearly in trouble. This is where it is apparent that, even by the government’s own phony official statistics, the country is in serious trouble. However the masses are still distracted with “bread and circuses” and are told that everything is fine. Remember the so-called “green shoots” of economic recovery the mainstream media was hyping a couple of years ago?
2. Increasing regulations, inflation, taxes, and police state measures. The sheer amount of current and future US government spending, coupled with the fact that there is no political will to make any meaningful cuts, means that higher inflation and taxes are pretty much a mathematical certainty.
Thanks to a veritable mountain of rules, laws, and regulations, the government can already essentially track and control every penny you earn, save, and spend. The noose continues to get tighter with several states already proposing the registering and tracking of precious metals transactions. And as the Snowden revelations have shown, it would be dangerously foolish to think there is any sort of privacy from the all-encompassing Orwellian surveillance state.
Lastly and most terrifying, are the near daily stories and YouTube videos that emerge showing the out-of-control behavior of the police. In case you are interested, Will Grigg, a regular contributor to LewRockwell.com, is perhaps the best chronicler of the metastasizing police state. Check out Will’s site here for more on that topic.
3. Capital controls. IM contributor Jeff Thomas says that “If the sheep are to be sheared, they must first be penned in so that they cannot escape.” This is exactly the point of capital controls. To lock in the wealth of a country so it cannot escape the shearing that is soon to come. Internationalizing your savings with offshore banking and storing your physical gold in a safe jurisdiction, such as Singapore, are a couple of ways to ensure that you won’t get penned in with capital controls.
4. Broad wealth confiscation measures. These are wide-ranging and are usually taken after capital controls have been imposed to prevent wealth from fleeing the slaughter. No matter the method, the net effect is always the same: The government grabs as much capital as it can get away with. This can include an official currency devaluation, measures against precious metals (windfall profits tax, confiscation, nationalization), and so-called haircuts of wealth held in electronic form like bank and brokerage accounts. The best way to protect yourself here is to internationalize your savings into something that is not easily confiscated, such as physical gold held offshore and foreign real estate.
5. Nationalization of retirement savings. It’s no secret that a very juicy target for a desperate government is retirement savings. Here the government converts the assets of a retirement account into so-called “safer” government bonds. As with most government measures, it is sold as something that is “for your own good.” Already we are hearing whispers from the US government about helping to “manage” retirement savings. This is code for converting retirement investments into US treasuries. You can protect against this by moving your IRA investments offshore and outside the immediate reach of your home government.
6. Price and wage controls. Having a foreign source of cash inflows and setting up an offshore company are good ways to protect yourself and your business against destructive edicts on the prices of goods, services, and labor. It doesn’t take a genius to see that price controls cause shortages—usually in food, energy, and basic necessities. Having a bolt-hole in a relatively sustainable locale helps to mitigate this risk.
7. People controls. Another tool in the desperate government’s toolkit is putting restrictions on the movement of its citizens. This is especially true for citizens who have accumulated wealth. Obtaining a second citizenship or legal residency in a foreign country ensures that you will always have another place to potentially call home without having to live like a refugee.
8. Wars to distract the populace. When all else fails, history has shown desperate governments have a tendency to start conflicts to bolster blind nationalism and distract the populace from their failings. All governments treat their citizens like milk cows to varying degrees, but they start treating them like beef cows when they need soldiers for their contrived wars. Again, having a second citizenship or a foreign residency and a bolt-hole far away from the front lines are useful here.
9. Game over. Failed wars usually provide fertile soil for severe civil unrest, revolution, and the potential emergence of a strongman at the helm.
The good news for Americans is that there is still time to take steps to internationalize.
I mentioned earlier that FATCA helps reveal what stage the US is currently at. While the US clearly is at stage #2, it is not quite to stage #3, capital controls. That said, FATCA and other regulations amount to a type of de facto capital controls, so in my humble view, I would rate the US somewhere between #2 and #3.
While there is still an opportunity for you to avoid getting boxed in by a desperate and out-of-control government, nobody knows exactly how much time is left. And once official capital controls are implemented (#3), your wealth is trapped and things tend to unravel pretty quickly.
Developing your internationalization game plan does not mean you have to leave your home country. It is possible to achieve a certain level of international diversification without needing to leave your living room, for example, by opening a foreign bank or brokerage account remotely.
The idea is to create your own personal insurance policy to immunize yourself from the common destructive measures of a desperate government. This is absolutely crucial given the state of the world we live in today. Doug Casey has said over and over, that spreading your political risk beyond one single jurisdiction is the single most important thing he can recommend.
In order to get started, you will need accurate information from trusted sources to navigate the minefield of misinformation and scams that are out there in the internationalization and offshore world. The comprehensive Going Global report from Casey Research will arm you with sound strategies and proven options to do just that.
Going Global is a comprehensive guide packed with actionable advice from renowned experts in international gold storage… opening foreign bank and brokerage accounts… moving your IRA offshore… investing in foreign real estate and currencies… the best second passports to obtain… and much, much more. Simply put, there’s no better resource available on international diversification than Going Global. Click here to learn more.