Expatriate Manifesto

Immigration Trends or Trading Places 2.0

Former New York City Mayor Ed Koch used to constantly ask the residents of that city:  How am I doing?  In fact he became somewhat famous and well known for it, even internationally.  We will borrow that from him and ask in general: How are you doing?  How is the country doing?  In terms of the economy and job market, from what we have heard in general and from some clients, there is some angst or uncertainty out there, and there probably should be.  But we think the angst, anxiety, uncertainty or whatever you want to call it comes from trying to reconcile what is reported versus what is real.  Average incomes for a large number of people in the so-called modern, wealthy, industrialized world has come down, that is very real.  In the US and now in the UK as well, young people are graduating university with mortgage sized student loans on their backs with a difficult time finding a job, that is also quite real.  And the response, the solutions from the learned high priests of politics and finance?  Unreal is the only word we can think of.

If you believe as we do, you probably already know that much of what is offered by the mainstream press as news is either sanitized or out of touch with reality.  Happy news I guess they call it, but we would call it cowardice.  I mean, how can anyone in their right mind believe a writer that simply mimics official government statistics that claim there is no inflation, that unemployment has really come down by half and that many of these government money printing – debt buying programs were an astounding success?  What ever happened to investigative reporting, speaking truth to power and all the other noble functions of the fourth estate (the free press in a democracy)? 

There certainly are opportunities out there (many of our clients have already had some successes), plus there are methods you can employ to stay ahead of the anti-business welfare state hydra that is doing everything it can to stay alive (and make you broke in the process). But, you need to realize that this is not your grandpa's economy and it probably never will be again.  And maybe that is the problem.  You are playing and thinking by the rules, but they did not tell you the rules have changed.  Are you ready for the new ones?

Immigration Issues: Trading Places Reloaded

What is probably coming up to what will be a decade ago now at least, we wrote an article that we titled Trading Places.  The article was mainly about what we saw as the coming economic and political shift from the so-called wealthy first world nations to the emerging or developing market countries.  Stated another way and to be more specific regarding how the term trading places ties in, we basically opined that the well educated, middle class and small business owners would start to move themselves and their assets out of the developed nations (read North America and Western Europe) and into the emerging markets.  All the while of course, the less well educated and the unemployed from these less developed (of what was often called the Third World) nations still trying to get into the European and North American countries that they believed continued to offer the myth of prosperity.  Ergo our trading places paradigm.  The result of course being that the growing markets get new residency and citizens who are usually educated and solvent.  The developed or so-called wealthy countries continue to get an influx of the world's less well off, financially and academically.  Now there are exceptions to this theory or concept, and specifically some people will cite companies in Silicon Valley actively soliciting well educated computer science graduates from countries like India.  But, we tend to think that was a reverse outsourcing play, whereby US companies were attempting to import lower cost educated labor from abroad.  And interesting enough, many of those highly skilled temporary workers ended up going back to their home country and creating start ups to compete with their former employers in the US.  But then the real question is why would they want to do that?  Why would anyone want to go back to a supposed poor emerging or Third World economy?  What did they know that you do not?

In terms of this human capital exchange paradigm (trading places), we think it appropriate and timely to touch upon this theme once again as many of the results or symptoms are now starting to make themselves quite obvious.  In terms of the so-called wealthy industrialized welfare state nations, we are starting to see chronic unemployment (see our article about US unemployment here), higher and exponentially increasing national government debt, debasement of some currencies due to inflation and money expansion, stagnant GDP in the previous group of G-7 nations while many of the emerging markets still post positive GDP (albeit with a global slowing down over the past 24 months), and a litany of other issues as well.  If you reply to this comment that government statistics show unemployment down or the stock market up or economy improving, you are not looking hard enough at why.  Artificial stimulus or the electronic equivalent of money printing (plus various QE type of activities) may have created the facade of economic improvement, but it is just that – a mirage.  No amount of government spending or artificial market manipulation can substitute for real investments, or real business activity.  Just like a terminally ill patient, pain killers can take away the pain temporarily and make the patient think he is better (or he certainly will feel less pain), but that does not mean the illness has been cured.

Our general prediction was then, as it is now, that many of these supposedly wealthy social welfare democracies will find themselves going broke, reneging on social welfare promises (for retirement pensions, etc.) and attempting to plug the financial shortfalls by taxing the remaining solvent citizenry even further.  Of course the result of that is those same solvent citizens will leave (note the constant yearly increases of US citizenship renouncement even before FATCA became the new most talked about acronym of 2014).   And again, who is replacing them in terms of new immigrants?  Those immigrants that are certainly less solvent, more likely to be qualified for minimum wage type of jobs and less able to make up for the lost income tax revenue from those that have left.  We do not make this comment to be rude or demeaning, but rather to simply highlight that the exchange of human capital (or the trading of places) is not always equal. 

The result of course is that this in turn creates a negative feedback loop as the tax base goes down in the previously wealthy industrialized nations, while the strain and commitments on the social welfare systems goes up.  And we tend to believe the government politicians already see this or know this, and thus the push back with initiatives such as FATCA (maybe currency controls will come next, but obviously that is just speculation).  But human nature being what it is, the more the government increases taxes or attempt to chase citizens globally for taxes, the more they attempt to enact draconian policies, the more the citizenry will look to escape with more vigor.  Adding insult to injury (and insult to the intelligence of many people) are the almost outright lies regarding unemployment numbers and inflation statistics offered up by government in countries such as the United States.  Which is to say, if they must lie about the true status of the economy, it must be even worse than one thought – no? 

However, and incredibly enough, we also asked the question in our original Trading Places article: How will the emerging or developing market countries react to this new wave of reverse immigration?  In other words, the paradigm (and complaint from the so-called wealthy developed nations) involved the poor and unemployed immigrants trying to get into the United States and Europe from Latin America and other countries around the world.  Obviously the hot topic has been the illegal immigration problem, meaning those that entered the country either without passing correct border controls or entered under the pretense of tourism (with the intent of something else).  And so now what we have occurring is exactly what we predicted previously:  out of work middle class people from some countries in Europe (Spain and Portugal mainly) and elsewhere migrating to the emerging market nations, both legally and illegally now.  And this of course is a brand new problem for the governments in the emerging market countries.   We think many were quite shocked and honestly unprepared for it, and some have already changed their immigration laws and requirements accordingly.

In Mexico for example, the time line and requirements for a legal resident to apply for citizenship was changed a few years back but not because of unemployed Americans necessarily flooding into the country but more out of public displeasure with the gringos tapping into the Mexican public health care system (which is connected to or part of the Mexican Social Security bureaucracy).  Which is to explain that Mexico had attempted to attract retirees as new residents and they successfully implemented a Pensionado or Retirement Program whereby one of the benefits was free use of the Mexican public health care system by such retired residents.  However, the program may have been more of a success that they intended because there are actually an estimated 850,000 Americans living in Mexico at the moment (and some estimates put the number at over one million).  And of course all those Americans are not down there because they had a sudden hankering for tequila and tacos.  No sir.  The cost of living is much lower for them in Mexico, their social security check buys them a better lifestyle and the Mexican Government was offering them free public health care as well.  But, poor and working class Mexicans sitting in public health care waiting rooms were a bit perturbed to to see what they consider to be wealthy silver haired gringos getting free health care in Mexico (taking up space in the waiting room and getting a free government benefit paid for by taxes local Mexicans have paid).  But wait a minute, isn't that the same argument Americans have been making all along in terms of illegal Mexican immigrants in the US getting all sorts of free social welfare benefits?  Funny what the reaction is when the shoe is on the other foot – no?  Maybe all those gray haired Anglos should get into their rascal motorized wheel chairs and conduct a convoy in Mexico City with placards that read: We Are Not illegal.  Then again, maybe not.

In the Dominican Republic there has been a wave of unemployed Spaniards flooding into the country (and all over Central and South America for that matter as well), and they came specifically looking for work of course.  It has been such a problem and there were so many of them that Dominican President Danilo Medina wanted to round them all up and deport them back to Spain (isn't that what Spain was doing for decades in terms of any illegally migrated Dominicans they caught there?).  Anyway, the Spanish Government nearly choked on a piece of Jamon Serrano and pleaded, no begged actually, for the Dominican Government not to return them and find a solution so they can become legal residents in the DR.  However, the problem persists in that the Spaniards have an EU Passport which of course allows them to enter the Dominican Republic without a visa (as a tourist) and this applies to a number of other Latin American nations as well.  So, the problem becomes how do you determine or separate people coming with legitimate tourist interests and those looking to do something else?   Again, this is a new problem for countries like the Dominican Republic.

The Dominican Republic has responded to all this by re-enforcing a requirement that persons wishing to apply for residency status in the country first apply for a special residency visa from the Dominican consulate in their home country (this requirement exited before, but it was not enforced).  In addition, they changed the waiting time for ordinary residents in that they must now wait 7 years to apply for naturalized citizenship whereas the waiting time was 3 years previously.  However, this is still a program or a process in place (by law, not just a fly by night policy) that allows investors and retirees to obtain a special class of permanent residency as their first step and such persons can apply for naturalized citizenship after 6 months.  So, in short, this encourages people who might offer an economic benefit to the country to become fast tracked (with some other privileges as well) while slowing down the rest.  This is fair, and in fact can only make Dominican Citizenship more valuable if it is harder to get (for more information about becoming a resident in the Dominican Republic under the new requirements, click here).

But what is really interesting is that in general, while the US and Europe pretty much ignored their illegal immigration problems (and in some cases granted amnesty, thus rewarding bad behavior and people that in essence broke the law) and have had some very negative effects on the solvency of social welfare programs as a result (see also previous news reports why so many hospitals in the US with high proportion of illegal immigrants as patients has to close up and go out of business), the emerging market countries are trying to implement a sensible immigration policy.  They have no choice really as they attempt to continue with economic growth and develop jobs for their own citizens.  And when you think about it, the United States was the emerging market country of their time 150 years ago and also eventually instituted very strict immigration quotas as well (not to mention tariffs to protect growing local industries, etc.).  So, to criticize any other nation for trying to use the same blueprint is very hypocritical, but hypocrisy does seem to be a tenet of US foreign policy (see the new proposals by the OECD basically copying FATCA, which would make US Financial Institutions responsible for reporting all foreign accounts inside the US to the respective foreign governments – and make note, as of October 31, 2014 – the US has NOT signed it).  Do as I say, not do as I do?

The Road To Perdition Is Paved With Good Intentions

First off we think it important to note that all of this was a long time coming.  It was not created due to the so-called economic crisis of 2008 alone, as the issues and events surrounding what lead up to the current day economy were a result of many previous initiatives that happened prior.  This is actually how we identified this trend long before this recent economic crisis was on anyone's radar screen.  And we can pinpoint the beginning with the US assigning most favored nation trading status to China by then President Bill Clinton back in 1994.  At the time, Ms. Ann Devroy of The Washington Post wrote an article (May, 1994) whereby she wrote: With China now the world's fastest growing economy, the United States exports $8 billion a year there, which sustains up to 150,000 American jobs. Many major American businesses see even greater potential in Chinese markets, expecting China to become a massive purchaser over the next decade of the phones, electronic gadgets and thousands of other products made in America.  Bill Clinton was quoted as saying at the time: I think we have to see our relations with China within a broader context than simply human rights (end of quote).  Ironically, the Democratic political party in the US has always tried to label itself as the defender of civil liberties, champion of the working man, and it's historical close ties with large labor unions would tend to support this comment.  So, it is quite amazing to find out that it was a Democratic US President that threw both the proverbial working man and the party's claim to fame as human rights advocate under the bus back in 1994.

But, we all know how that eventually worked out.  Whereas the US sold US$8 Billion worth of stuff to China (Made in America) back in 1994, it is also true that in 2013 the US sold China US$120 Billion worth of American made stuff.  However, the US imported from China US$440 Billion worth of products in 2013, leaving yet another new annual trade deficit of about US$320 Billion.  But what about those 150,000 US jobs mentioned in 1994 that were to be sustained and protected?  The Economic Policy Institute (www.epi.org) calculated back in 2010 that almost 500,000 US jobs were lost to China due to relocation of US manufacturing to lower wage Chinese facilities between 2001 and 2008.  A more recent 2013 article by Mr. Robert E. Scott tells us that a total of 2.7 Million US jobs were lost with about 1 Million higher paying jobs requiring at least a bachelors degree as part of that mix (http://www.epi.org/publication/trading-manufacturing-advantage-china-trade/).

Of course, also during that same year (January 1, 1994) NAFTA or The North America Free Trade Agreement went into effect as well.  Many of you will remember Ross Perot's television rant about the sucking sound of US jobs going down to lower wage workers in Mexico, and there were those that belittled Mr. Perot as being some kind of conspiracy nut.  However, Public Citizen issued a report whereby they claim that 20 years after NAFTA was implemented, close to 1 Million US Jobs were lost and there exists a US$180 US Trade deficit with Mexico and Canada because of the agreement.  To be fair, there are those that have presented their own set of statistics and arguments that the US economy and employment situation was improved by NAFTA, not made worse.  With that said, I am reminded of an old saying: When your neighbor looses his job, it is a recession.  When you loose yours, it is a depression.

But, while all of this was going on, during the relocation of manufacturing jobs abroad, it certainly was true that those people still gainfully employed enjoyed either lower prices for manufactured products or in the least prices that appeared to be frozen despite any domestic US inflation.  In other words, the US$29.99 coffee maker from 1998 was still perhaps US$29.99 in 2004 because the manufacturer could hold the price and still make a profit using lower production costs abroad.  And this lead to the comment that the short term beneficiaries of all these free trade initiatives and resulting outsourcing were the better educated holding white color (read non manufacturing) jobs,  who did not see their own employment prospects in jeopardy.  In fact, it was touted that even though US manufacturing had gone to low wage jurisdictions abroad that the design and engineering work would stay in the US.  In other words, the brainy work would theoretically still be done by Americans while the uneducated poor foreign devils would do all of the tedious grunt work somewhere else – for a much lower wage of course.  But the good citizens of China and other emerging market nations have had some other ideas about all this.

International Social and Economic Inequality Rises Due To Education

A recent 2014 news item reported that US University graduates are graduating school with a now collective US$1.2 Trillion Dollars worth of debt, in the form of student loans.  From an article originally appearing in The Chronicle For Higher Education by Mr. Lance Lambert (October 24, 2014) we hear that two researchers working with the Federal Reserve Bank of New York claim that a bachelor degree for a 2013 American graduate was worth on average US$272,693.  They also claim that the wages of high school graduates has been FALLING, and even though  the wages for University Graduates are NOT increasing either, the comforting factor for the well educated is that there is a ever widening earnings gap between the college educate and those who are not.  The OECD also recently produced a 2014 report titled Education At A Glance whereby they essentially come to the same conclusion looking at ALL the OECD member nations.  The report also supports the claim that the modestly educated (those without higher level degrees) are falling down to the same income levels as those with nothing more than a basic education level.  In other words, unless you have a MBA, PHD and maybe more than one, chances are your future income possibilities are less than stellar.  But hold on, because there is more.

There will be an estimated 900,000 foreign students enrolled in US Universities in 2014, with about 30 percent coming from China.  This enrollment amount represents an increase from 10 years ago whereby there were about 600,000 foreign student in US Universities.  However (and pay attention to this) – it is reported that foreign students contribute about $24 billion annually to the U.S. economy, and about two-thirds of them primarily pay their own way or their families do.  This means that while American university graduates are drowning in debt, their foreign counterparts studying in the US could conceivably graduate debt free (most Americans cannot afford to pay cash for their children's US university education but many foreigners can, and do – regardless if they feign something else to tap into grants or aid).  Meanwhile, China has been very pro-actively trying to attract foreign universities to set up campuses in China and foreign university professors to teach at China's various universities.  China has also doubled the number of universities inside of China during the past 10 years, spending about US$250 Billion Dollars annually on education, which we are told comes out to 4 percent of their national GDP.  But, it still is not enough, and there are not enough spaces for all the Chinese that do want to attend college.  Ergo, they are coming to America and other foreign nations as well in order to attend university.  Since the year 2000 the number of Chinese with university degrees has doubled and the Chinese government would like to double it yet again over the next decade.  So much for the Chinese doing the factory work with the well educated Lords of the Universe doing all the higher function work in the US.

Here is another twist to all this.  China has been actively trying to lure foreign students to it's own universities and they are giving scholarships accordingly.  In fact, in China's Jiangsu province, there has been a spark of local anger over scholarships (up to US$15,000) being given to so-called wealthy foreigners, not to mention the Chinese students are ticked off because they say foreign students are given better housing accommodations.  The statistics from 2012 indicate that China was the fifth most popular study destination for US students and there were 320,000 overseas students in China as well.  So, it is interesting to see the shoe on the other foot as it were.

Go Where The Money Is: The Emerging Markets

A 2013 report from Euromonitor International, written by Ms. Sarah Boumphrey and Ms. Eileen Bevis, indicates that the Emerging Markets as a group accounted for 37 percent of global GDP in the year 2000, and it was expected that these same group of countries collectively would account for 50 percent (or more) of global GDP by the close of 2013.  The report goes on to say that while much ado has been made about the BRICS (Brazil, Russia, India, China and South Africa), the other smaller emerging markets (like the Dominican Republic, Singapore, Malaysia, Vietnam, Mexico, etc.) are garnering attention because they are experiencing even faster economic and demographic growth.  Consumer spending is up in many of these markets (as we can attest to if you look at the new stores and malls opened within that last 3 years in the Dominican Republic alone).  The title of the report was actually Reaching The Emerging Middle Classes Beyond BRIC, and the study was meant to show where the next new consumer growth markets will be.  In fact, the report tells us that the emerging markets collectively were home to 85% of the world’s population, and 90% of those under age 30. Their total population is expected to grow at three times the rate of developed economies between 2013 and 2020.  Consumer spending growth in emerging markets has outpaced that of developed countries every year since 2000 and is expected to continue to do so.

What does that mean to you?  Well, while it might be quite noble for a captain to go down with his ship, I tend to think the overwhelming majority of people reading this are not seafarers.  And even if you happen to own your own sailing vessel of some sort, we think most will radio the coast guard and man the life raft regardless.  So, of course the analogy is that to stay on board while political leaders continue to send the country down the proverbial straits of destruction might be noble and patriotic, it will not yield a favorable outcome for your children's nor your own economic welfare.  With that said, there are a number of criticisms to the concept of expatriation, and of course the relocation of Facebook co-founder Eduardo Saverin to Singapore resulted in all kinds of palpitations from Senator Chuck Schumer, the esteemed gentleman from New York always looking for a new cause to get some media coverage.

However, in the case of Mr. Saverin, one must remember he was a Brazilian citizen by birth who lived in the US from 1992 to 2009, obtained US citizenship during that time and eventually renounced US Citizenship effective September 2011.  Of course that alone did not make him noteworthy nor newsworthy.  Rather, he apparently obtained some very good and proper legal advice and was able to save an estimated US$67 Million in capital gains taxes on his Facebook shares, once the company went public.  Mind you that while he was permanently living in Singapore between 2009 and 2011 he continued to pay US taxes.  Of course Senator Schumer was so worked up that he presented the Ex-Patriot Act bill in 2012, or what was formally called the: Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy Act (try saying that fast with a mouth full of cheerios cereal, I dare you).  But not satisfied that the original bill died a Dr. Kevorkian like death in the US Congress, Chuck tried again to slip it in onto another bill in June of 2013, whereby it was quietly lanced away yet again – that is until now.

Round about August of 2014 (why does this stuff always seem to happen during the summertime?), we come to learn that the tax saving shenanigans of a Brazilian young man were not the only crease in Chuck Schumer's shorts.  He was also experiencing what appeared to be emotional chronic jock itch from the number of US corporations that were planning to expatriate as well, or what has been coined an inversion (is this a synonym of out-vestment?) .  Now for those of you not familiar with the term, an inversion simply means that the US corporation changes it's tax domicile or tax home by either buying or merging with a foreign company.  In some cases, they can form a new company of their own abroad and bust a move (as they used to say back in the 80's).  Regardless of how they do it, the benefit usually is a lower corporate income tax rate for the company.  Sort of like say a US company moving corporate headquarters and state of incorporation from maybe New York to Delaware or Nevada, but we digress.

Apparently there have already been a number of US companies that have left in this manner, with a reported 47 firms within the last 10 years and a number of others in the wings waiting to do so before this year is out.   Interestingly enough while the theme of renouncing citizenship (corporate or otherwise) invokes images of tax havens such as Panama, Belize or the Cayman Islands, a number of US companies have actually been going to Ireland in particular (Ireland has a corporate tax rate of 12.5 percent).  The US drug store chain Walgreen's was apparently planning a move to Switzerland, that is until they were shamed out of it by some negative feedback (word has it they were really, really big fans of Ricola cough drops).

For more about this you can read an article from the Washington Post below:

http://www.washingtonpost.com/business/economy/us-policymakers-gird-for-rash-of-corporate-expatriations/2014/08/05/4898ca5e-18d9-11e4-9349-84d4a85be981_story.html

Not to be outdone, we now have Senator Elizabeth Warren joining the fray (former professor from Harvard and outspoken critic of the banking industry).  Senator Warren steps it up a notch from Senator Schumer whereby she proclaims: They are taking advantage of all the good things that our government helps provide, and then running out on the bill.  She goes on to also say: For a person who doesn't want to pay a fair share, our message is clear: you can renounce your citizenship, but don't come back and expect the rest of us to pick up your tab (end quote).  Two other congressional thespians, Senators Dick Durbin and Jack Reed went on to opine that the United States Government  could lose billions of dollars in tax revenue if the U.S. government does not take action soon.  They point to an estimate by the congressional joint Committee of Taxation which claims that the nation could lose nearly $20 billion over the next decade (due to corporation inversions, which comes out to US$2 Billion PER YEAR just to be clear on the math).  However, we do wish to remind these good gentlemen that the 2015 fiscal year budget for the US military is now in, and US$85 Billion (Billion with a B) has been set aside for US military operations in Afghanistan alone (the entire US Military budget for 2015 is US$756 Billion, with a B).  Just one year mind you.  If they want to save some money, I have a few ideas (US$2 Billion versus US$85 Billion or US$756 Billion – we think the source of a balance sheet adjustment is obvious to anyone with a grammar school understanding of mathematics, and the theatrics of the US Congress on the subject of corporate expatriation a tad unwarranted).   

Not one to let a good crisis go to waste (and who would not want to get in on a photo opportunity with Chuck and Liz?) , President Obama chimes in with the following (and you might want to write this one down, as it is sure to become a classic): My attitude is, I don’t care if it’s legal. It’s wrong (end of Presidential quote, but not to be forgotten).  On that note, let us also review some of the good things Senator Warren wants to remind us that the US Federal Government provides all it's faithful citizens.  Allowing illegal immigrants to obtain driving licenses and vote in US Presidential Elections is apparently legal, but wrong.  Allowing the national debt to increase to such proportions that the nation's children and grand-children might be paying it off is legal, but wrong.  Permitting airport personnel to grab and poke the genitalia of airline passengers (in search of mustard gas and other armaments prone to hide in the nether regions of frequent fliers) is legal but wrong on so many levels, we do not have enough space to list them all.  In fact, there are so many things that are legal but wrong, there is not enough reams of paper in the local Office Max store to write them all down, but let's get back on topic.
In defense of corporate citizenship renouncement we have Mr. John Engler, president of the Business Round-Table, who asserts: We’re the proverbial frog that’s being boiled in the water, and a few frogs have decided to jump out.  Mr. Daniel Mitchell at the Cato Institute calls the whole thing a fiscal version of blaming the victim.  And how right he is.  Politicians continue to do outright foolish things with tax-payer money, including spending the US$2.7 Trillion Dollars that was (and we would like to emphasis was, as in no longer is) in the Social Security Trust Fund, and then they have the nerve to call anyone who expatriates unpatriotic.  Freeloader was one term used by the esteemed elected officials in the US, but is that truly accurate?

Regardless of whether we are talking about individual citizens or corporate entities, the truth of the matter is that right up until the time of citizenship renouncement, taxes has been paid year in and year out.  Income taxes, payroll taxes, employer portion of FICA, sales taxes, gasoline taxes, real estate or property taxes, fees in the form of tolls to cross bridges and drive on certain highways, and the list goes on.  So, to claim that someone or some entity such as a company is freeloading is disingenuous.  Of course that never stopped a politician from using this argument because it plays well to an audience that may not be too astute as to what is really going on when it comes to government finances, and all the shenanigans that have taken place.

The term expatriate, often condensed to simply expat, is a person temporarily or permanently residing in a country other than that of the person's upbringing, according to Wikipedia.  Many people do confuse the definition and believe it means someone that has renounced citizenship, which of course is something they may or may not do eventually. However, because of this confusion there are still those that will throw around the term even though many people might have moved to another country to take advantage of employment opportunities, business opportunities, or lower cost of living in retirement – and not necessarily to renounce citizenship.  But, as politicians in the high tax welfare state nations continue to attack such persons living abroad through various taxation or other kinds of initiatives (FATCA comes to mind), they are pushing these people to renounce citizenship whereas it may not have been their intent previously.

Regardless, considering the long term trajectory of the state of affairs in the United States and countries that constitute Western Europe (France, Italy, Greece, Spain, The UK, etc.) we have doubts as to the opportunity and growth prospects for those that make up the middle class and small business owners in these nations.  Aside from the fact that these economies are considered to be mature, and that the tendency is for much lower economic growth rates in general because of it, the levels of federal government debt and unfunded social welfare program benefits that still have not been resolved, we contend that better prospects are going to be found elsewhere (and specifically in the emerging markets that do not have these kinds of problems).  The cost of living is yet another theme as well, as governments often choose the low road of currency debasement and inflation.  As it stands now there already is tremendous interest in relocation to lower cost emerging market nations by the baby boom generations in all of the above mentioned mature economies simply because they have no choice.  As governments devalue their national currencies, retirees and savers are always hurt the most.  However it is not just the retirees, but also younger families who might have school age children that are finding out good quality bi-lingual education costs are a fraction of the cost in many of the emerging market countries as well.  So, generally speaking, expatriation is a matter of economic survival, and not some act of betrayal as some would like for you to believe.