In a wide-ranging interview with Casey Research editor Louis James, Doug
Casey discusses why it's imperative to start diversifying one's assets today,
and provides some guidance in considering countries to diversify into.
L: Doug, we're getting a lot of questions from
readers on how to follow your advice to diversify assets politically. I know
it's a prickly subject, but what can you tell us about getting our money out
from behind the new iron curtain that seems to be descending?
Doug: First – and I can't stress this enough –
you've got to accept the grim reality of impending currency controls. The
modern era of foreign exchange controls really started with the perversely
Orwellian-named Bank Secrecy Act of 1970. For the first time, that made it
obligatory for US citizens to report any foreign bank or brokerage accounts
they had to the government.
But the threat is older than that, of course, going back to 1933, when
Roosevelt confiscated Americans' gold. Interestingly enough, only gold
bullion held by Americans within the United States was confiscated. If you
had gold outside the United States, you were insulated.
L: I didn't know that – if history repeats itself,
that could be a key tactical factor for our readers to consider.
Doug: Yes. There are no guarantees, of course. Those
in government today think they can do absolutely anything they deem necessary
and expedient. But at least if it's out of their physical bailiwick, it
improves your odds.
L: Why do you think they allowed that exemption last
time? I doubt it was because they had any shred of respect for private
property – maybe they just recognized that trying to seize gold overseas
would be impractical.
Doug: Good question. Well, the 1930s were a
different era. Communication, for one thing, was vastly slower and more
expensive than it is now. And you have to remember that though we had an
income tax in the 1930s, since 1913 actually, very few people were paying it
– even among those allegedly legally obligated to pay it. It was hard for the
government to find out who they were, and how much they were earning, and so
on. Even though there were only 140 million people in the country then, the
absence of computers and much less centralization made it very hard for
Washington to keep tabs on them.
L: The income tax really was a voluntary tax back
then!
Doug: [Laughs] Much more so than now – it really was
a different era. At any rate, based on this history and that the juggernaut
is building momentum towards the bottom of the ditch, I have to reiterate my
advice on the most important investment decision you can make. And it isn't
one among the different classes of investment; it's political and
geographical diversification. Simply put, that's because no matter where you
live, your government is the greatest threat to your wealth today.
If you're a high-income earner, the state basically takes 50% of what you
earn, and then from what's left, you have to pay your real estate taxes,
sales taxes, and many, many other kinds of taxes. Government is without
question the biggest danger to your financial health. You've got to diversify
your assets so they are not all under any one government's control.
L: You say that in almost every speech you give
these days, and you said it in one of our interviews a couple of weeks ago.
Doug: Yes, and it bears repeating, constantly. It's
the elephant in the room that very, very few people pay any attention to, and
it's going to stomp most people to death, for just that reason.
L: Okay, so give us a primer. For those who want to
avoid getting crushed by the elephant, where do they begin?
Doug: To start with, it makes all the sense in the
world to have a foreign bank account. Not a hidden one – I'm not advising
anyone to break any laws. You report it on your annual tax filings. So, the
government will know about it, but if it's a foreign bank account, they can't
just step in and lock down your assets in an instant.
L: Does Canada count as a foreign country for
Americans?
Doug: I'll probably get hate mail for saying so, but
it's important for investors to recognize that Canada is a sort of "USA
Light." When Washington says, "Jump!," Ottawa says, "How
high?" Nonetheless, if only for the sake of formalities and legal
pleasantries, US citizens would have some degree of insulation with a
Canadian bank account. And, as a general rule, Canadian banks are more
solvent than US banks, so setting up a Canadian bank account is an easy first
step for many US investors.
The second thing to do would be to set up a Canadian brokerage account.
Unfortunately, the SEC has made it so that no Canadian broker will open an
account with an American unless they have a US subsidiary. That, in effect,
makes your Canadian brokerage account like a US brokerage account. That
doesn't help you much from an asset-protection point of view, but it does let
you trade directly in many of the stocks we recommend in the International
Speculator and the Casey Energy Report (not
through a US market-maker via the pink sheets).
Third, I think that having a safe deposit box in Canada is vastly
preferable to having one in the US. You probably do remember that when
Roosevelt confiscated gold in 1933, he also sealed safe deposit boxes in all
US banks. No American could visit a safe deposit box for some time without a
government agent accompanying him. That could certainly happen again.
And all of this is true in other countries around the world.
But yes, as an easy place to start, Canada is a sort of plain-vanilla
jurisdiction that's worth giving a try.
L: So, what would be the French vanilla, or even the
Bailey's Irish Cream jurisdiction? Is there such a thing as a tax haven
anywhere in the world anymore? Even the Swiss have caved… I just heard that
they just started handing over new account info to US authorities.
Doug: Yes, apparently there were some 50,000
accounts UBS had, owned by US citizens. UBS, a multinational bank with a very
substantial presence in the United States – and therefore exposure to
extortion by US authorities – was going to hand them all over. The Swiss
government stepped in, saying they would prosecute UBS officials if they
violated Swiss law by doing that. But the Swiss worked out some sort of
compromise with the US authorities, so only about 5,000 accounts are being
handed over. On what basis they picked these 5,000 is uncertain.
So, the first tax-haven rule is to never go to a place that's obviously a
tax haven. If I were interested in bank privacy, I'd forget about places like
the Bahamas or the Caymans. It makes no sense at all today. All those little
island republics are totally under the thumb of the US at this point. And
they've always been infiltrated with stooges. They may have bank secrecy
laws, but they don't have a tradition of privacy like Switzerland has –
although that's no longer what it was.
You'll recall how the German government bribed a Liechtenstein banker to
steal account names and information. The Germans then turned over relevant
data to the UK, US, and other governments, who were quite happy to receive
stolen goods. And there was about zero protest over the appalling theft. It's
a testimony to how thoughtless and ethically complacent most people are; when
a state commits a crime, they just overlook it.
L: Are you saying that all of the little havens are
unreliable?
Doug: Well, I don't know of any that are reliable.
Instead, I would recommend places that are geographically distant from the
US – and culturally distant as well. To me, the best places to be are in the
Orient. That's partially because the Chinese and other Oriental civilizations
are much less prone to roll over and do what they are told. National pride
ensures that, if nothing else.
But if you go this route, with, say, an account in Hong Kong, you
certainly would not want to use a bank like HSBC. It's got branches all over
the world, prominently in the US – so, like UBS, they'll do what they are
told.
Actually, there are still Swiss banks that will open an account for a
"US person," if you can convince them to do it. But you definitely
do not want a Swiss or Liechtenstein bank that has any presence in the US.
The same would be true in the Orient – so forget about HSBC. You want a real Chinese
bank. That way, when the US government calls, the phone will be answered in
Chinese and no one will speak English with them.
The best places are the least obvious places. Malaysia is interesting.
Thailand. These are completely non-tax-haven types of places – and that might
make them suitable.
L: What about step two, getting a brokerage account?
Doug: Well, it's tough these days. If you want to
trade in US and Canadian stocks, you pretty much have to have an American or
Canadian broker. But one thing that can be done that is completely legal (and
reportable) is to open up a foreign company. Then the company can open up a
brokerage account. That way, you do have a level of insulation I think is
very valuable, both from a practical and a legal point of view.
L: I gather you're not talking about the banana
republic IBCs I see peddled on the Internet?
Doug: Right. Most of what you see on the Internet
offering to open up an IBC – which is just an offshore company – are just
scams, if not stings. The fees are too high. The people are usually sleazy.
They often come up with all sorts of cockamamie tax-avoidance schemes. You
may be encouraged to do things that are illegal. They are just disasters
waiting for you to walk into. I strongly encourage people not to even
consider such offerings.
If you want an offshore company for the purpose of convenience or a
measure of privacy, completely reportable and within the law, the best thing
to do is to go to the jurisdiction you've picked and see a lawyer who deals
in that sort of business. Cut out the middleman. Ideally, the jurisdiction
would be one that meets the criteria I outlined above, but is also a place
you'd actually enjoy spending time in.
L: So, you hop on a plane to, say, Panama, and… how
do you go about finding a reliable attorney to set up your corporation?
Doug: That's the intelligent way to do it. There's
nothing illegal, nor particularly tricky about it; you just find a lawyer who
specializes in it, pay the fees, and off you go.
How do you find a good lawyer? Same way you do at home; you go and start
interviewing lawyers until you find one that impresses you as being sound.
Panama, by the way, is probably the best place to do this at this moment.
The British Virgin Islands may be another. And, of course, if you're an
Australian or a New Zealander, you should think about Vanuatu – it's only a
two-hour plane ride from Sydney or Auckland.
Back in the Western Hemisphere, the only other reasonable alternative I
see is Uruguay. It's always been promoted as the "Switzerland of South
America" – and there's a lot of truth to that. Uruguay is a small
country, about the same size and with the same size population as
Switzerland, and a very big part of its national income is foreign banking.
It has no tax on foreign-earned income – though, unfortunately, it recently
instituted a tax on domestic-earned income. Too bad.
Another unfortunate thing about Uruguay is that when you import gold there
– such as by carrying Krugerrands in your briefcase – their customs form asks
you to report it. It's not against the law, but for some ridiculous reason,
they want to know.
L: That's really all it takes? Find a lawyer and pay
the fees?
Doug: Yes, though there can be nuances worth paying
attention to. For example, there are various jurisdictions with different tax
treaties that can be used to your advantage. The Dutch Antilles being a
famous example, as far as dividends treatment goes. This is a specialist area
that, well, you should discuss with a specialist. But you should definitely give
it some thought.
Oddly enough, you can import gold into Argentina with no problems nor
reporting requirements, and you can buy and sell gold in Argentina just as
easily. It's much easier than in Uruguay, but I wouldn't dream of doing any
significant banking in Argentina – and neither do Argentines. The government
is just completely untrustworthy when it comes to things like bank accounts.
So, it's rather perverse; you can deal easily in gold in Argentina, but
not bank accounts, and you can't deal in gold easily in Uruguay, but bank
accounts are easy.
Frankly, the best place to look for one-stop financial services shopping
is Panama. Banking is easy, and there's no gold reporting.
And yes, you can still take gold in and out of the US without reporting it.
It's like stamps or rare coins. The exception would be, if you had enough of
them, to remember that Double Eagles have a face value of $20, and the new
Eagles have a face value of $50.
L: What about your cash, once you have your offshore
bank account set up? You have to declare it if you take more than $10,000 on
your person, but can you wire whatever you want?
Doug: Yes, you can send any amount of money you
want, currently. It gets reported, but it's basically unregulated. And by the
way, the $10,000 limit doesn't cover gold, but it does cover stock
certificates and other financial instruments – but you can still send those
by Federal Express.
L: I wonder how long that will last…
Doug: I'm sure they'll get 'round to closing all the
loopholes. So, the time to act is now. We'll keep monitoring the situation,
but when this happens, the Powers that Be won't want anyone to see it coming,
so it will zing in from left field. Your only chance to protect your wealth
is to start diversifying its exposure to any one particular predatory state
as soon as possible.
I have to stress again the urgency of diversifying the political risk your
assets are exposed to: do it now.
L: Okay, Doug – thanks!
Doug: You're welcome.
Your first step toward internationally diversifying your wealth is to tune
in to a Casey Research webinar on the subject. Internationalizing Your
Assets premiers at 2 p.m. Eastern Time on Tuesday, April 30. Doug Casey
– Casey Research chairman and a New York Times best-selling author –
highlights a blue-ribbon cast of financial experts who will reveal their
favorite strategies for protecting your wealth abroad. Get more
information and register now.