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often not covered by the mainstream media, articles of interest
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Dominican Republic Real Estate, Residency Filing, Banking and Interest Rates.
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Economics commentary, inflation, housing, stock markets and investing -
Plus a Whole Lot More !
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Our August 15, 2006 Newsletter Edition
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IN THE NEWS:
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U.S. ECONOMY SLOWS SHARPLY - July 28, 2006
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WASHINGTON -- The U.S. economy's growth slowed sharply in the second
quarter, logging just a 2.5 per cent pace as consumers tightened their
belts and spending on home building suffered its deepest cut in nearly
six years. Inflation, however, shot up.
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http://www.theglobeandmail.com/
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US GROWTH SLOWS, BUT INFLATION PICKS UP - July 28, 2006
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Figures this afternoon show that US economic growth slowed abruptly
during the second quarter of this year while a key measure of inflation
accelerated. At the same time, an inflation gauge favored by the
Federal Reserve - a measure of personal consumption expenditure prices
minus food and energy - jumped at a 2.9% rate in the second quarter,
well ahead of the first quarter's 2.1%. Department officials said
it was the fastest rate of increase for this figure in nearly a dozen
years, since the third quarter of 1994.
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http://www.rte.ie/business/2006/0728/usa.html
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DOLLAR FALLS AFTER US GDP SLOWS IN Q2
By Nick Olivari - Fri Jul 28, 2006
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NEW YORK (Reuters) - The dollar fell after a government report showed
weaker-than-expected U.S. economic growth in the second quarter,
lowering expectations for the Federal Reserve to raise interest rates
at its next meeting. Gross domestic product grew at a 2.5 percent
annual rate in the April-June quarter, well below Wall Street analysts'
forecasts for 3 percent and less than half the robust 5.6 percent rate
registered in the first quarter, the Commerce Department said on
Friday. At the same time, an inflation gauge favored by the
Federal Reserve - a measure of personal consumption expenditure prices
minus food and energy - jumped at the fastest rate of increase for the
gauge in nearly a dozen years.
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http://za.today.reuters.com/news/
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FEDERAL RESERVE MUST TREAD CAUSTIOUSLY
By Gene Sperling - August 7, 2006
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A look at the economy today reveals that in real terms, hourly and
weekly wages are slightly down since the beginning of the recovery in
November 2001, and real median family incomes dropped each of the first
three years since 2001. The personal savings rate was negative last
year and is again this year, the worst since the Great Depression. With
low wages and high debt, what has solid consumer spending of the past
two years been based on? Housing. For most Americans, the main
source of their wealth is their home and not their stock holdings. So
when median equity holdings declined 22% from 2001 to 2004 while median
home prices rose 34%, it was still good news for their financial
situations on the whole. This has led to a strong middle-class
"wealth effect", with families spending more, based on their assessment
of rising home-wealth. This can be seen in the large increase of
Americans using their home as if it were an automated teller
machine. While mortgage equity withdrawal was about 1% of gross
domestic product (GDP) in 1995, it has risen to 5,5%.
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http://www.businessday.co.za/articles/world.aspx?ID=BD4A246428
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EDITORS NOTES:
As Gomer Pyle used to say - SUUURPRIZE, SUUURPRIZE. We now have
inflation - no kidding? Who would have guessed - eh? Here
is another factoid for you - While inflation is reported at 2.9 percent
(of course that does not include fuel and food, as I guess most
Americans never eat or drive - so the numbers are really much higher
than what the nice folks in the government would like for you to know)
wages and salaries have only risen by LESS than one percent. In
fact, the news article says: a measure of personal consumption
expenditure prices minus food and energy - jumped at the FASTEST RATE
OF INCREASE for the gauge in nearly a DOZEN YEARS. So what is the
REAL number when we include food and gasoline? Are we talking
about 8 percent inflation, 10 percent inflation, 15 percent inflation -
25 percent inflation or what? It is interesting to note that some
statistics out there would seem to indicate they (US Federal Reserve -
Helicopter Ben and company) are inflating the money supply by about 10
percent currently (it was about 7 percent in previous years before they
decided to STOP reporting M3 statistics). And on the one hand,
while the US Federal Reserve says they are mindful to battle inflation,
the truth of the matter is, they will allow inflation run wild IF it
means the lesser of two evils, the other being DEFLATION. Yes, my
good readers, behind door number two is deflation, something the nice
folks at the Central Bank and our hero, Helicopter Ben, are scared to
death of (falling prices and wages, especially real estate with all
those juicy adjustable rate mortgage loans piled up). This is
what happened during the so-called Great Depression, and they are more
afraid of that than anything else (the fall of prices today, not wages,
as wages have already fallen in real terms over the recent years and
they could seem to care less about that). Of course, they the
bankers should be concerned about deflating real estate prices, with
mountains of loans created against real estate home prices that could
be possibly worth less than the loans. Sort of the economic
equivalent of an upside down cake, hold the frosting please.
Regardless, once again, income is not going up fast enough to keep
pace, ergo loss of buying power for the middle class worker. And
of course interest rates are going up, up, up - Double Ouch if you have
an adjustable rate mortgage. Some economists have already
surmised that a deep recession - depression has already started in
2000, albeit excessive home equity borrowing and inflated home prices
have simply masked this - temporarily. We will have to wait and
see who is correct (or not). However, it is interesting to note
that the Great Depression did not really set in until about 1931 (the
stock market drop in 1929 was a precursor). The critique of those
scholarly types (such as the current Federal Reserve Chairman, who
focused on this event, the Great Depression of the 1930s, during his
University days in terms of study) was that the US Federal Reserve did
not pump sufficient liquidity into the economy during the Great
Depression, making matters worse. Today of course, since they
think they now know the magic formula, and perhaps are indeed pumping,
or shall we say printing, like mad. Is the sky falling?
Well, while it was true that many people whom were caught unprepared
suffered during the Great Depression of the 1930s, it is also true that
there was 75-percent employment (3 out of 4 were still working and had
jobs) AND anyone with cash and safe liquid assets did quite well
(snapping up ultra cheap real estate due to deflation, and of course
enjoying a lower cost of living as well). In any event, why would
you inflate the money supply further if you were REALLY worried about
inflation? Could it be they are not exactly honest with the
general public and the main concern is to protect the banks real estate
loan portfolios from deflation instead (and the public be
damned)? One interesting fact - personal savings rates have
turned negative for the first time in 70 years, which is what exactly
happened during 1930 - 1931. Is this a mere coincidence or a
leading indicator of what awaits us? Is history doomed to repeat
itself?
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SMOKING GUN WAS VICE TOUCH - By Brian Mciver - July 25, 2006
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COLIN FARRELL said he was worried about being kidnapped while filming
the Miami Vice movie in the Dominican Republic. He needn't have
worried as from personal experience I know they take crime seriously
down there. I was once getting a long-distance bus across the
country to capital Santo Domingo, and was concerned to see the
conductor literally riding shotgun, with one of the sawn-off kind of
numbers you see in movies tied around his neck with string. The
gun was to ward off the banditos and guerrillas in the jungle, but he
found a different use for it when a member of my family, who shall
remain nameless, nipped into the toilet of the fully armed but
non-smoking coach for a sly cigarette. The conductor spotted the
smoke, rapped on the door with the gun, and made the most effective No
Smoking gesture in the history of nicotine by escorting her sheepishly
back to her seat with the firearm.
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http://www.dailyrecord.co.uk/news/
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EDITORS NOTES:
We were a bit surprised at this story, as most of our clients have
indicated they enjoyed the Dominican Republic quite a bit, and never
felt unsafe or uncomfortable when they visited. So, we did some
digging on the story and what we found out is as follows.
Apparently Colin Farrell was filming a movie (Miami Lice, Miami Vice,
something like that) at a location in the Zona Colonial district, and
in fact was filming in a fourth floor apartment inside a residential
building. Keep in mind of course he was assigned security and local
police officers, as was the film crew in general. A Dominican
fellow comes home from work, and finds he is told he cannot enter the
building (to his own apartment, his own home) because Colin Farrell
happens to be filming somewhere inside the building. His reply
was Colin who? Who the %#@ is Colin Farrell and why cant I go
home? It is not clear if the men at the doorway were
plain-clothes or uniformed police officers, but apparently a scuffle
ensued with the apartment owner taking out his gun in the
process. What provoked him (whether the guys at the door were
uniformed police or perhaps plain clothes rent-a-cops which permitted
the apartment owner to think they were hoodlums or whatever) remains
unclear. In any event, apparently our Mr. Colin Farrell
presumably heard about the incident (he was tucked away on the forth
floor never even aware of what directly transpired) and PRESUMED in his
own egocentricity later on that someone was trying to kidnap him.
So, there you have it. A Dominican man comes home from a long day
at work and wants to go home to his apartment, only to be told he
cannot (it is never a good idea to tell a Dominican they cannot go
home, you are asking for a fight). The end result is that Colin
Farrell soils himself, figuratively speaking, hallucinating into
thinking this was a kidnapping attempt. As we have said many
times before, there is the truth, and then there is the equivalent of
literary baloney. Of course, it is always much easier to believe
the wild-eyed fantasies or negative rumors rather than the facts or the
truth - no?
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As for the British Gentleman that wrote the above article, there are no
banditos in the jungle, at least not in the Dominican Republic at any
event (make sure you get your countries straight). Dominicans, as
most Latin Americans, believe in personal responsibility plus law and
order. The sawed off gun, a very common sight in super markets, health
clubs and almost everywhere else for that matter, is a JUST IN CASE
sort of deal. Just in case the bus stops at a tourist eatery and
some wise guy attempts to rob one of the bus riders. Just in
case, someone thinks they are above the law and want to try
something. Just in case. In terms of carrying the gun with
him to the back of the bus when scolding the female relative of the
author who just could not wait like a normal responsible adult until
the next rest stop to have a smoke - ONLY an idiot would leave a loaded
weapon unattended in a public place (such as on a crowded bus).
However, this reaction of the author is very typical of the average
citizen of the so-called more advanced welfare nanny state
environment. Which is to say, it is clearly a case of false
understanding and gross misperception. You see a citizenry with
firearms and assume the country is ripe with lawlessness (and banditos
in the jungle). I interpret this as a country with people who
wish to behave as law abiding citizens, but should the crooks come
calling - they are ready - just in case. On a similar vein, a
Dominican would have to surmise that Americans and perhaps Europeans
are some of the dumbest people on the planet based upon what they see
when visiting the US or Europe as a tourist. As one example, when
they go to purchase a mans shirt wrapped inside a plastic packing bag
from a department store that says in print: THIS IS NOT A TOY - DO NOT
ALLOW YOUNG CHILDREN TO PLAY WITH BAG. You must be a special kind
of stupid to give a plastic bag to an infant to play with. You
must be really dumb if your government has to actually pass a law
insisting this be printed on such a wrapper. I think it quite
ironic. Such warnings are not printed on packaging in a country
where many people have not attained higher education, but such people
still DO have common sense. In the country with higher levels of
literacy and education, common sense is no-where to be found. Go
figure. In any event, the key point is, one cannot apply
prejudices, stereotypes and preconceived notions learned growing up in
one country when visiting another. Warnings on plastic bags do
not mean everyone in the country is a complete moron, just as a guy
with a shotgun (just in case) does not in and of itself mean there is a
crime wave afoot, or banditos in the mountains
either.
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EDITORIAL: THE ECONOMICS OF OIL REVISITED
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Ever get the feeling that the more information you read, the more
confused you get? I had one of those kinds of epiphanies recently
regarding oil (if you can call it an epiphany as opposed to a mind
warp). Who is telling the truth about oil? Hard to say, but
after we examined both theories, I do know the outcome for you and me
is surely the same - higher priced oil and gasoline (which translates
into less money in our pocket, higher cost of living, higher electric
utility bills, lower economic growth and inflation).
.
Let us start off with our hero (or villain), M. George Hubbert, a
geologist for the Shell Oil Company that produced a research paper on
March 7, 1956 outlining a theory that the world was basically running
out of oil. Hubbert's Peak, as it became to be known, said peak
oil production would hit the US sometime in the early 1970s, which did
not mean that oil would be depleted by that date, but rather that we
would hit the half way mark and that oil production would start to
decline from there. Similarly such dates were predicted for
Venezuela, Saudi Arabia, Iran and so on. Indeed, some recent
books (Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, The Long Emergency: Surviving the Converging Catastrophes of the Twenty-First Century, The Coming Economic Collapse: How You Can Thrive When Oil Costs $200 a Barrel, The End of Oil: On the Edge of a Perilous New World)
all focus on that general idea and offer additional support for the
Hubbert theory. In fact, there are a few books out there that
even claim Saudi Arabia has directly lied about its oil reserves, and
they don't have what they say they have (but claiming more in reserves
lets then pump more under OPEC guidelines, and earn more money or so
the theory goes). When you think about this theory of a limited
supply logically, it does make sense. It took the earth millions
of years to cook dinosaur bones enough so that it was eventually
converted to oil. However, we know there are no more dinosaurs to
cook up, and have not been for some time. So, the argument that
there is really only a finite amount of the stuff in the ground does
sound logical. Of course, the same can be said for other natural
resources as well, such as coal, zinc, cooper, gold and so on. In
addition, it also makes sense that the more difficult to extract it,
the more costly, eventually not making it cost effective at all.
So, the explanation has been offered that what we have been extracting
has been the easy to get at supply, like the low hanging fruit on a
tree. The problem or argument is not if the stuff will run out in
our lifetime necessarily, but rather when the easy to get at oil will,
which is really the main problem. There are statistics that do
tell us the US has 5 percent of the world's population, but uses 25
percent of the world supply of oil. China and India are coming up
fast, and could easily start consuming resources, and oil of course
specifically, at the same rate, very soon. So, aside from the
fact there is only so much, there are now other nations growing
exponentially and using even more and more of the stuff than ever
before - drawing down the reserves that much quicker. In a
nutshell, that is one of what I will call the logical camp (physical)
argument for higher priced oil (diminishing supply, higher demands from
China and India, and ergo higher prices due to supply - demand factors).
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We have of course another group that thinks all this to be one giant
conspiracy on the part of the oil companies, and truth be told, the
arguments are logical as well (although less easy to prove as this
involves nebulous human conspiracy rather than the measurement of a
physical commodity in the ground). In any event, a good read
regarding this can be found in a recent book by Mr. Greg Palast titled:
Armed Madhouse
(June 2006). Palast argues that the Hubert's Peak theory was
offered up in 1956 and accordingly based upon known oil reserves at
that time. Since then, there have been new oil deposit
discoveries (North Sea as just one example) and not only that, there
are supposedly large reserves of the hard to get (but still gettable,
for lack of a more grammatically correct way to say it) oil, such as
the oil soaked tar sands in Canada (albeit that only becomes profitable
to extract and refine when oil is up there in price to make it worth
while). With regards to Iraq, Palast argues that the whole ordeal
was about the oil, but not what you think. In other words, his
research and arguments point to very large and untapped reserves in
Iraq that the oil companies want to keep OFF the market. In
tandem with this, the desire by the oil companies to make sure the oil
industry is NOT privatized in Iraq, but rather kept as a nationalized
industry part of OPEC (and part of OPEC's strict quota system as
well). All logical arguments since we do know that commodity
prices, and very much so for oil, are especially very sensitive to
supply and demand (too much oil and the price goes down, not enough and
the price goes up). In conjunction with that, Palast also offers
us some political insight as to why Iraq is still a mess and currently
involved with a civil war, claiming the Neo-Cons wanted to privatize
the oil, flood the market with cheap oil and break Saudi Arabia and
OPEC at the same time, whereas private oil wanted something different
(tight supply, higher prices). All this, according to Palast, has
pitted two powerful forces, the Pentagon and the State Department
working at cross purposes in a power struggle, and why in part the slow
progress and resultant civil war as well in Iraq.
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In any event, take your pick - the result is the same. Either the
price of oil is high because in part we are running out of the stuff
(not disputed by the way entirely from those who say there is still
plenty in the ground yet, in the sense that it will eventually run out
- just a matter of perhaps much, much later) OR the oil companies are
keeping supply off the market in order to jack up the price (and their
own profits). Regardless, higher priced energy costs have always
led to inflation, recession and harder times economically for the
average consumer. As the sign says: Happy
Motoring.
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READERS WRITE IN:
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Did you notice that US citizens airlifted out of Lebanon recently were
charged $250,000 for their flight to Cyprus? Even the
effervescent college-boy Tucker Carlson at MSNBC was surprised at that
one. Talk about Compassionate Conservatism at work. I'll bet that even
those greedy French didn't charge their people that much and you know
the food was better and they probably served a decent wine! As to
the UK flamer: he can have his German TV.
.
EDITORS REPLY:
A news story dated JULY 15 said the following: US media reported
that there was talk of an airlift between Lebanon and Cyprus using
military planes. However, the State Department stressed that the
costs of the flights had to be paid for by those who wanted to leave
Lebanon, but there was the possibility of applying for loans. The
US administration put the number of US citizens in Lebanon at around
25,000. A news story dated JULY 19 said this: The US
government has backed down from billing evacuees from the besieged city
of Beirut for their helicopter flights to safety. Canada has sent
seven boats to rescue an estimated 50,000 of its own, and said all
would be flown home for free, as did several other countries with
smaller numbers of expatriates. Late on Tuesday, Secretary of
State Condoleezza Rice announced she was ordering the rescue fees
waived, CNN reported.
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I have not heard any more news chatter about this (perhaps a US media
blackout on the subject?) so it is hard for me to say, or find much
additional new news out there. However, it is interesting to note
that the news article says that the US State Department waives the fees
for a HELICOPTER rescue from Beirut to Cyprus, but NEVER said anything
specifically about flying from Cyprus to the US. Either way, are
you really so surprised? From my estimates and calculation, they
are BROKE. They have to be, what other reason could there
be? How else can you imagine a supposed wealthy government even
thinking about doing such a thing, unless they had no other
choice? Which is say, unless they really, really are in dire
straights and need the money - why else would they charge citizens for
a rescue that involves taxpayer funded public or government assets
(military helicopters, navy ships and other modes of government owned
transport)? By the way, on a related side note, I will have you
know that the Dominican Government reported that three Dominican
Citizens in Lebanon contacted the Dominican Consulate for help.
Through a coordinated effort with the Panamanian Government, the DR got
their people out (and did not charge them). Imagine that?
The tiny, so-called third world banana republic rescues its own free of
charge. Even more noteworthy is that they certainly do not have
the economic and other kinds of resources the larger, so-called
wealthier nations have. I would never even have imagined, or
expected that the Dominican Government to do this (with the mindset
that they could not, economically or otherwise). To tell the
truth, I am proud of them. So, for all our clients that have gone
through the process to become new Dominican Citizens - there you have
it. When someone (and a US citizen especially) asks why in the
world you would want to become a citizen of a so-called third world
tin-pot banana republic, you can tell them - Because, my government
will come and help me - for free. How about yours?
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ANOTHER READER WRITES:
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Can you provide me with updated opinion as to living in Dominican
Republic in light of the current lawlessness, which appears to be
widespread and pervasive at this time? I do subscribe to your
newsletter.
.
EDITORS REPLY:
The Dominican Government started a program previously called Barrio
Seguro, or literally translated - Safe Neighborhood. The idea was
to increase police presence and patrols in some of the higher crime
areas (read poorer areas), with the idea to cut down on crime by having
more police in the area. Guess what? It worked and crime
did go down in these areas and that was the good news. The bad
news is, the crooks simply migrated to those neighborhoods where this
program was not in effect, which translates into the middle class and
upper middle class neighborhoods. So, since criminal activities
were sort of an expected and everyday occurrence in the poorer,
economically marginalized areas, they did not get too much press
coverage. However, a purse snatching in a very well heeled upper
income neighborhood is indeed front-page news (because not so
common). So, we ask the question - has crime really increased or
has it simply been transported from one area to another? In my
opinion, it simply has been transported and because there have been a
case of events in the more upper income neighborhoods, the result has
been these instances have gotten more press coverage. With that
said, the middle class and upper middle class are highly ticked off,
and the government has now rolled out this so-called Barrio Seguro
program everywhere (or almost everywhere). Where will the crooks
go from here? Maybe jail, maybe the morgue, maybe Haiti, maybe
Miami - who knows? However, many honest law abiding people own
and carry licensed guns in the Dominican Republic, and you are not
violating the civil rights of a crook if you shoot him in
self-defense. So, crime is a very dangerous profession in the DR
for the thief - the person you are trying to mug might have sufficient
firepower to fill your backside with some lead. In the US and
Europe, the crooks are the only ones with the guns, and therefore have
the upper hand. Think about that for one moment and which country has
more common sense.
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Any place there are people, there is crime - that is a fact (and
usually the larger the population or in more concentrated urban areas,
usually higher crime rates accordingly). The real question is, is
there more crime, less crime or about the same when discussing the
Dominican Republic versus other jurisdictions. The statistics
overall talk about less crime in the DR relatively speaking to other
very dangerous places - like Puerto Rico and the US Virgin Islands -
Saint Thomas, just to name two of a very long list. I can only
say in terms of my own experiences and opinion, Santo Domingo is
probably much safer and has less crime than many, many other US
cities. With that said, most foreigners do not want to believe it
(because the negative stuff is always so much more appealing), and in
addition, many tourists visiting the all-inclusive resorts are scared
to death on the first day they arrive at the resort? How
so? The newly arrived guests are given an orientation chat and
warned not to leave the resort compound due to various dangers that lay
in waiting outside the resort walls (crime of course, mayhem, giant
killer mosquitoes that might airlift your young children to Haiti,
etc.). But not one of these tourists ever bothered to think - I
wonder if they are trying to frighten me so I stay here and spend ALL
my money inside the resort? The first time I visited Jamaica many
years ago, they told me the same thing (must be the first thing they
teach employees at the all-inclusive resort employee training
academy). I ventured out and live today to tell the tale. Go
figure.
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ANOTHER READER WRITES:
.
John - I am growing weary of our American trends that act like the
government is God. I have nothing to hide from them or any one
else, but I like my privacy and don't want to be a pawn in their
game. Am I trading one tyranny for another when I come to the DR?
.
EDITORS REPLY:
First and foremost, let me say again that no country is perfect, and
that includes the Dominican Republic, so there is no all-perfect
paradise. However, I have also said many times that Dominicans in
general are very Libertarian in their thinking and attitudes, even
though they may not know it. So, the difference is the culture
and the people rather than the form of government - as it is
interesting to note the Dominican form of government is copied exactly
from the US model (Senate, Congress, Supreme Court and
President). If I had to distill it down, I would have to say that
Dominicans generally may not ALL be very well educated, but they ARE
street smart, have common sense, and are in no mood to allow anyone
(including government) to attempt abuse. They also are very big
fans of private property rights, making them living and practicing
disciples of such ideals I mentioned (Libertarianism, Austrian School
of Economics, etc.).
.
With that said, Americans and Europeans see Dominicans (and other Latin
Americans) lash out at times in terms of certain acts of what are
considered civil disobedience and are left with the impression there is
some sort of chaos, or inherent lawlessness in terms of the society -
which is not true. Dominicans are law abiding, and certainly want
an environment of peace and quiet. In fact, in terms of social or
religious tolerance, someone once told me the DR is perhaps the only
nation on the planet where the Jews and the Arabs actually get along,
and ironically, it seems to be true (German Jews settled in the DR
during the WWII era and many Lebanese when the civil war broke out
there in the 1970s). However, push the Dominican people, try to
violate what they feel are god given private property and other rights
- you are going to have a fight on your hands. I view this as a
positive attribute as government knows there is only so far they can
go, or that there is only so much the citizenry will tolerate. In
the US, the citizenry is afraid of the government rather than the other
way around - which do you think is better in terms of true
liberty? If Thomas Jefferson were alive today, I have no doubt
his favorite Caribbean travel destination would be the Dominican
Republic (he would get along with the Dominican people just fine I am
inclined to think and would understand them perfectly as well).
.
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ANOTHER READER WRITES:
.
My family is very interested in relocating; please send any info on DR
that would be helpful in making that move to the Dominican Republic. I
have a wife and daughters. We are concerned about there education in a
different country, could you give some insight in that area?
.
EDITORS REPLY:
I have a few clients that have enrolled their children in some of the
local private schools, and in fact, I can speak from some experience
myself, with one of my wife's nieces living with us as well. Yes
indeed, Uncle John knows all about finding the right school, talking to
school directors, buying school uniforms (the kids wear uniforms here,
both in public and private schools), report cards and the rest of
it. In any event, your education choices are going to be limited
to a Private Bilingual or English Only School (assuming your daughters
do not speak Spanish). The good news is that there are plenty of
excellent private schools of this kind to choose from, although they
will be found in urban areas (Santo Domingo, Santiago) rather than in
rural or even resort areas (although I hear there is an excellent
private school in the Juan Dolio area and up near Puerto Plata as
well). I have found that, for the quality of the schools and the
teachers, the tuition is a bargain in comparison to what you would pay
in the US or the UK for the same thing. Obviously tuition can vary, but
you can expect to pay on average about US$1,700 (the equivalent of) for
the entire school year (for what in many cases is the equivalent of a
private bi-lingual or English only prep school). If your kids
speak Spanish then even better as the tuition costs will be much
less. The private school I found for my niece costs about the
equivalent of US$800 per year, but of course it is not bilingual,
although they do offer classes to learn English and French as part of
the curriculum. There might be a few schools above this in terms
of cost, that cater to very wealthy local families and children of
executive expatriates, but for the most part, what I mentioned is the
ball part figure. Take your time, visit some of these schools,
but my guess is that you will be very pleasantly surprised (small class
sizes, excellent teaching staff, very modern and up to date facilities,
no drugs or crime in the school, kids that actually behave and want to
learn,
etc.)
.
.
ANOTHER READER WRITES:
.
Hi, Many thanks for your newsletter. I enjoy reading it. I have a
question. I have a long-term house rental in the Dominican Republic and
intend to either buy or build a place for a more permanent move there
in the not too distant future. Your articles about real estate
are very good and it is an area where, if you shop away from the newer
developments aimed at the foreign buyers, there are still a lot of
bargains to be had. However - and this is my question - why is it
that when property is relatively cheap compared to other Caribbean
countries and labor costs are also relatively low, the cost of
furniture and white goods for your new home are so expensive?
From my experience prices seem to be well in excess of similar products
in say Miami, and if they are expensive for relatively well-off
foreigners how can local people afford to buy them? Maybe I've
just been visiting the wrong stores. If you have any thoughts or maybe
even an article on the subject I'd be interested to read it.
.
EDITORS REPLY:
You are a scholar, a gentleman and a fine judge of wines. In
other words, a very insightful question which I am glad to
answer. First off, on the real estate issues, I am glad to hear
that you have been able to find some reasonably priced properties for
yourself by looking away from the over-priced projects marketed to
tourists (if the glossy brochure is in English, expect to pay double or
triple). On the issue of furniture, and most imported goods for
that matter, you are certainly correct in that many things do cost the
same as in the US, and perhaps even more in some cases as well.
The simple reason for this is of course import duties or tariffs, which
can go into the thirty percent range. However, you must
understand that most Dominican citizens DO NOT pay income tax, simply
because they are not eligible to (you must earn more than 21,000 Pesos
per month before you start paying any income tax, and even then it is
on a pro-rated scale going up to 25 percent as the top rate - and most
Dominicans do not earn that much in terms of monthly salary). In
any event, why bring this up? Well, the Dominican Government gets
most of their tax revenue from import duties, sales taxes, tax on
gasoline and similar use taxes. So, the down side is, yes you
will pay more for imported goods because of the duties. On the
other hand, I am a strong believer in use taxes as being MORE
democratic (you control the fact of when you will buy or not buy
something and therefore have some control over when you might be paying
such tax, not to mention that purchases for large ticket items such as
furniture are only once every 6, 8, 10 years - whatever the time frame
- as opposed to a yearly event). However, the other side of the
coin is, as you mentioned, labor costs are much less as are many, many
other costs as well (real estate).
.
In theory, the implementation of CAFTA should make these higher prices
go away, as in theory there would be NO duties or taxes on items
imported from the US (but of course not the case on products from
Europe or elsewhere). The flip side to that is, the government
has to get the money from someplace, and sales taxes will go up in
tandem, making it a wash economically for the consumer (and why CAFTA
is a really bad deal for any small country that signs on and nothing
more than a way for US manufacturers to break down trade barriers that
protects local markets and companies in order to sell inside of
countries they know are the future markets - where consumers still have
cash and are not buying with borrowed home equity money, but another
matter for another day).
.
Let us move on to the shopping question. It is true that if you
shop the larger chain department stores, you will certainly come to
realize that foreign brand (imported) furniture and appliances to cost
more than the locally made Dominican items and even some of that not so
dirt cheap. However, there is a secret to shopping for some
items, and part of that involves going to look at local hand made
mahogany furniture (Caoba wood is local mahogany) or rattan - wicker
furniture in some of these small manufacturer shops. The great
thing, as you mentioned, is that such hand made furniture costs a
fraction of what it would in the US or Europe, in part because of the
lower labor cost differentials. In addition, you can bargain,
have something custom made even, and talk with the guy actually going
to make it. It will take a little investigating to find these
places, because they are not in the high rent districts with fancy
showrooms, but there are many of them out there (the foreigners do not
know where they are, but the Dominicans know). I found a few such
places not too long ago that make rattan and wicker furniture, and I
found another that specializes in Caoba as well (if you want to get a
solid mahogany dining table, for example). It took me a bit to
find the places, and you should have seen the face of the workers when
I walked in, one guy has his mouth so wide open that the cigar he was
smoking fell out (I guess they do not get too many gringos).
Anyway, whereas craftsmanship has almost died out in the US (and if it
does exist, expect to pay dearly) it is still alive and well in the
Dominican Republic. Moving onto the electronics area, the great
thing about the DR is that there are many, many imported Chinese and
Korean brands that are not in the US, and are quite cheap (and
reasonable in terms of quality). The problem is, in terms of
anything these days - it is ALL made in China. There is also not
much of a quality gap anymore either as the same Chinese factory could
be cranking out Panasonic, Sharp and the local brand, Foo Yuck, all at
the same time from the same place. Granted, Foo Yuck does not
have nice commercials or magazine advertising, but if their televisions
are made in the same factory as Panasonic, with the same components -
but half the price - what the heck? If you do not believe it,
check out the television cabinets, where the connections are, and the
factory markings if you can find it. In many cases, same stuff,
just different name. Heck, forget about Japanese brands, almost no
American brands are made in the US either, so either you are buying a
washing machine or so-called American car battery from Mexico or if
electronics, then China for sure regardless of the brand. Foo
Yuck, here I
come.
.
.
ANOTHER READER WRITES:
.
What about transfer of silver/gold out of the country? How does
one go about safely moving physical bullion out of the USA? Also
where would one want to move bullion?
.
EDITORS REPLY:
There are a number of different ways to buy, own and hold gold or
silver. One is to consider what is called - the gold you can
fold. In other words, gold depository receipts issued by a number
of different companies offering this service (Perth Mint of Australia,
Kitco in Canada, etc.). In this regard, you would buy gold and
either have it held on account for you, or ask for physical depository
receipt certificates that you can present to a number of agents
worldwide should you wish to sell later on. This is very similar
to buying stock from a broker, and either leaving the stock
certificates in your brokerage account, or asking for a physical stock
certificate in your name, which you could in theory take to any other
broker to sell later on. This is a very interesting idea in terms
of traveling with your gold, as technically these are nothing more than
warehouse or depository receipts (and are therefore not cash or
financial instruments per say, such as checks and so on). So, in
theory, you could board a plane with a warehouse receipt indicating
US$1 Million worth of gold and not violate any current reporting
regulations (just as boarding a plane with a gift certificate from JC
Penney does not constitute one of the items referenced for current
reporting). Of course, I hate to give this kind of information
publicly because I know there are many people who read this newsletter
who have, shall we say, other interests (and mark my words, they will
change the regulations going forwarded to address this, so as they say,
get it while you can).
.
The other option might be to consider a physical safe keeping service
offered by many of the larger banks in Switzerland, Hong Kong,
Singapore, etc. Yet another, the old fashion method of buying it and
carrying it, which is not always so easy to do, but gold coins such as
Canadian Maple Leafs, South African Kruggerands, Chinese Panadas, etc.
make it a bit easier. The one thing about gold is, it is
certainly fungible and is accepted around the world, which cannot be
said for many of the fiat currencies floating around.
.
.
ANOTHER READER WRITES:
.
John, Wow, where do you find the time? Thanks for your well
thought out and informative newsletter. Just a couple of quick thoughts
I have regarding your August edition. Corporate welfare - totally
against it, however I do think the argument against double taxation on
both investor profits and the corporate entity has considerable merit.
Truthfully, as an opponent of forced progressive taxation I'm not
certain either should be taxed. I think a fee system for service is
much more agreeable and fair than a system based on a percentage of
profits. Regarding public (read: government) education; I am
unconvinced I should be forced to support it. While no one could
convince me that education of the masses is not important it seems
unfair that those without children should be responsible for the
actions and decisions of others. The arguments of social contract,
civic duty, etcetera - ring hollow. Simply an argument by the majority
that decided to have children forcing a minority to participate in
their responsibility. While the argument that it is an investment
in the future is at least thought provoking, however, the truth is that
probably very few people, if any, have children for that reason unless
of course that 'investment' is to selfishly indenture their children
into providing for their ailing adulthood. Service to the
community? That's a laugh. People have children simply because
they want them not because they are going to do me any good. Also, I
think it unfair that we have expanded public responsibility to include
pre-natal care and school meals. There is even talk of expanding public
education to include college. I suppose it is not enough that we
already pay for education. When all does not go well often because of
parental ineptitude, indifference or neglect we are then expected to
pay for our fellow citizens rehabilitation and then often, eventually
their incarceration. Is this nothing more than appeasement of the
masses? When is enough, enough? As to dual citizenship, I hope to
acquire that status in the near future for all and more reasons than
you have mentioned. Also, an early retirement to the DR, Panama
or Mexico is also a welcoming thought. Next, the tax system -
only kidding! If you've gotten this far you've suffered enough!
Again, thanks for your newsletter. I will continue to look forward to
receiving it.
.
EDITORS REPLY:
Thank you for your letter. On the social contract issue, the
contract is a one-way street in the US (you pay, and you get nothing or
next to nothing) even though the problem is most people do not realize
it - think about Hurricane Katrina, this issue of charging to rescue
Americans in Lebanon, etc. Of course the fantasy and rhetoric is
much more appealing than the reality. In addition, it is always
much easier to shirk responsibility and pass it on to big brother (of
course, what do you do when big brother is broke and backs off the
social contract later on?).
.
.
ANOTHER READER WRITES:
.
A couple of things to bring to your awareness - in case you haven't
heard. NONE of the money, according to both Pres. JFK and Ronnie
Regan, goes to ANY government program. JFK said - Not One Nickel
and Regan, after commissioning his own investigation, called the Rose
Report said - Not One Dime. Secondly, the US government has
already declared bankruptcy at least 6 or 7 times, the last one being
in 1991, I believe. I heard a statement by Congressman
Trafficante (something like that) where he was speaking to the senate
or house and said, in part, I stand before you in the middle of the
largest bankruptcy in history, that of the United States of
America. The first one gave all the US property to Great Britain,
which is why we don't OWN property any more - we just pay taxes and
mortgages on it and think we own it. If you don't pay the taxes,
what happens? Right, THEY come and take it away from you, and
re-sell it to another dupe. So, nothing new is happening.
It's all been carefully planned for many decades, to bring down this
great country to the level of third-world countries, economically,
socially, educationally and otherwise. Thanks for the updates.
.
EDITORS REPLY:
Thank you for the letter and many of these comments are very old news
as well. Some people think Trafficante is a few sandwiches short
of a picnic (the elevator does not go to the top floor, the lights are
on but no one is home, you get the idea), and he might be on some
things, but many of the things he has said are not completely untrue
either. Ron Paul is another member of Congress that has spoken
out as well, albeit he is certainly fighting an uphill battle - a lone
mongoose in a den of corporate sponsored snakes (how do these guys have
the audacity to place themselves in front of a television camera,
patting themselves on the back for passing a national prescription drug
plan for Medicare - and then quietly vote DOWN the financial funding
for it, which of course goes completely unreported?) The problem
is, you are never going to get a straight answer from any politician
nor from the high priests at the Federal Reserve either. They
will never let you know the true state of the economy or the true
financial health of the government either, so do not even bother
asking. In this regard, I think it is important to read as much
as possible and sift through the official information with much
skepticism. At the end of the day, when all is said and done -
you must learn to take care of yourself and be able to decipher truth
from fiction. However, as they say, ignorance is bliss. You
may not like what you find out once you start digging, but dig you
must, if you want to take certain action and also be in a position to
protect yourself and your family. The truth will open your eyes
to many things, but the problem and difficulty is, you will have to
find out what those problems really are on your own. Regarding
your comments, I honestly could not validate nor discredit them.
But, I can say, if it waddles, quacks, has webbed feet and has feathers
- the probability is that you are watching a duck cross in front of
you. In other words, they can tell you whatever they want in
press briefings, but no money for schools, no money for this new
Medicare prescription drug for the elderly, charging citizens to rescue
them during an emergency or disaster - what does it all mean? Is
the economy fine and dandy, is everything peachy keen OR are they broke?
.
.
ANOTHER READER WRITES:
.
Am interested in property in the DR. Why do you say there will not be a problem with the electricity in 5 Years?
.
EDITORS REPLY:
I think you perhaps misunderstood what I have said or in the least are
taking some of my comments out of context, as higher costs for
petroleum will be a problem worldwide and will also have an effect upon
costs and supply capacity of electricity as well. I have said
that countries like the Dominican Republic will be better PREPARED to
deal with an environment of power outages (they are used to it)
psychologically and socially (when the power goes out in the US,
looting and rioting is the norm rather than the exception - whereas in
the DR, locals grab a beer and play dominoes by candlelight).
However, from the perspective of the local market being prepared and
ready for alternative energy solutions, I also think the Dominican
Republic is way ahead of the US. Granted this is due to other
reasons, or shall we say, previous experiences with electricity
issues. Which is to state more clearly, batter inverter systems
are the norm and it is not a major jump to simply add on solar panels
or a wind generator system in a residential home. In fact, such
residential solar and wind systems are readily available from a number
of suppliers right now, today, in the DR. Americans are still
living with the fantasy that oil is, or will be cheap again, and that
abundant energy as well (such as electricity) the normal status
quo. We already are seeing today a number of power outages daily
throughout the US simply because there is not enough supply to meet the
summer demand. The question then is - Are Americans prepared
psychologically and otherwise (if the electricity company shuts down
the grid and causes a brownout) should shortages of electricity and
much higher prices become the norm rather than the exception?
Dominicans surely are, and in terms of the comments - which society
will function better under such circumstances five years from
now? I do think it very telling that solar panel and wind systems
for the home - residential market is available and becoming more and
more well known in the Dominican Republic (which means people are open
to this idea and are installing them right now, today). In
addition, I also think it to be very interesting that James Woolsey,
the previous chief spook at the CIA, thinks oil (or lack thereof) is
the number one security threat to the so-called American way of life -
and the man has his own home outfitted with solar panels, etc. If
the former head of the CIA, who must have access to much more
information that you and me, is so concerned that he has his home
decked out and ready for a crisis, then what does that tell you?
However, most Americans still refuse to believe it, and many could be
sorely surprised in the future. I guess only time will
tell.
.
.
ANOTHER READER WRITES:
.
First, I would like to congratulate you for the high degree of
transparency in regard to facts mentioned in your publications. Please,
I would like to ask your opinion on my query - Dominican Republic VS
Mexico/Yucatan for US Retirees/Seniors.
.
EDITORS REPLY:
This is a difficult question to answer as I have alluded to before in
terms of similar questions like this. Meaning, there is nothing
wrong with living in Mexico or in the Dominican Republic either.
The real question is, where do you feel more comfortable or which place
offers more of the things that might be important to you
personally. I do not know of any major political or economic
issues that would make one necessarily stand out over the other.
I think it is a question of investigating each one and taking a look at
cost of living, lifestyle, and those issues (be it location, taxation,
etc., etc.) that are most important for you. I hate to sound so
vague, but the truth of the matter is, this applies to a number of
jurisdictions. For example, is Thailand better than the Dominican
Republic or Mexico or Panama or Ecuador, etc. and so on?
Obviously there are some places to possibly stay away from.
Bolivia for example is currently on a socialist rampage, and the state
nationalizing private businesses (and private property), does not bode
well, in my opinion for the long term. On the other hand, one can
see what is going on in certain countries and what the most likely
scenarios will be going forward. Brazil as just another
example, of a nation that is now completely independent of foreign
petroleum and a country that will most likely NOT have energy
difficulties going forward. So, where do you want to live?
Does the country you are investigating score the highest on your
personal checklist of wants and concerns? That is truly the
question.
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