|
|
|
Our
on-line
newsletter bulletin now going on our seventh year!
Offering our clients and readers news items and headlines
often not covered by the mainstream media, articles of interest
regarding banking, economics, real estate, taxes, living or investing
abroad, plus much more. Finally, our very popular readers write
in section, with answers to some of the questions many of our readers
have - that no one else wants to answer truthfully, except us!
Want to See our
Other Back Issues from 2002 - 2006?........Click Here
|
|
|
|
Visit
The Main Newsletter Section &
Read Past Issues On-Line:
Dominican Republic
Real Estate, Residency
Filing, Banking and Interest Rates.
Panama Residency and Retirement. Naturalization and Dual
Citizenship - Expatriate Issues.
Economics commentary, inflation, housing, stock markets and investing -
Plus a Whole Lot More ! .
|
Our November 15, 2007 Newsletter
Edition
|
.
|
SANTO
DOMINGO REAL ESTATE:
.
Many
of our American clients have asked us what to do as a hedge against a
falling US Dollar. One answer is that, historically, gold and
real estate has usually acted as a hedge against currency
inflation. Of course, in terms of real estate, buying in the
right place at the right price is essential. In other words, we
already know that property values in many areas in the US and in the UK
are falling (and who knows when or how fast they might recover). Along
these lines, there are still very affordable properties in the
Dominican Republic (and elsewhere as well to be fair), not to mention a
still favorable exchange rate with the US Dollar at the moment in a
country not embroiled in foolish lending practices in terms of banking
and mortgages.
.
One
of course may consider real estate either as a retirement home (should
you be nearing that time in your life, and as an alternative to holding
dollars at 2 percent bank account interest when the actual inflation
rate is much higher), as an investment for possible rental income, and
dare I say, as a property to hold for future value later on. Have
some extra, extra cash? How about US$1.2 Million for 23 Acres on
one of the most breath-taking beaches you have ever seen in the
Caribbean? That comes out to about US$52,000 per ACRE, for beachfront
(and you have to see it to believe it, the place puts beaches in Hawaii
to shame). Buy it with some friends, you have 23 acres to play
with, so nobody gets on anyone else's nerves. Where is it?
I will give you a hint, the tourists don't know about it because it is
not near Punta Cana, but rather its on the Caribbean Side - the road
less traveled, as they say.
.
If
a more modestly priced property is more your style, remember that if a
property is valued at less than $5 Million Pesos, or about US$150,000 -
there are no
annual real estate taxes in the Dominican Republic. Here
is a sample of new luxury apartments (condos) for sale in Santo Domingo:
.
MIRADOR NORTH: New 3 Bedroom,
2 Bath 1400 square foot apartments from US$128,000. New 3
Bedroom, 2.5 Bath 1800 square foot apartments from 5.2 Million Pesos
(about US$158,000), ready in July 2008
.
LA JULIA: New Luxury Apartment
in a building with swimming pool - one bedroom apartments starting at
US$108,000. New 3 Bedroom, 2.5 Bath 1700 square foot apartments
starting at 4.2 Million Pesos (about US$128,000) ready in February 2009.
.
LA JULIETA: New Luxury 1, 2 and 3
Bedroom apartments, starting at US$61,000 for 800 square foot one
bedroom up to US$320,000 for the 3,200 square foot Penthouse.
.
For More Information: REALESTATE@DOMINICAN-REPUBLIC-INFO.COM
.
.
EDITORIAL: Beware Of The
Hungry Jaguar
.
The
Indians in the Amazon rain forest, when teaching the young men how to
hunt, warn their adolescent apprentices to stay far and clear of a
Jaguar trying to catch fish in the river. Why? Well, they
claim anytime you see a large cat willing to get himself wet in order
to eat, that you are witnessing an extremely hungry (and very
dangerous) animal. So it goes with governments and taxes as well.
.
Indeed
we have alluded in the past to a coming tension between what we like to
call the sovereign individual and the welfare state. Stated more
clearly, a deep conflict of interest arising between those law abiding,
self sufficient persons who perhaps have a more libertarian bent in
terms of their outlook and personal conduct, and many of the so-called
modern (and supposedly wealthy) welfare states that appear to be
grasping for air to hold on to dear life, financially speaking.
In short, a scenario of some governments that truly no longer have the
finances to fulfill the generous welfare - pension obligations so
promised to the masses. This for certain creates some very
telling problems going forward as there are those that are in dire
dependence of these government programs (and I do not mean the indigent
poor necessarily or exclusively), and those that would prefer to
extricate themselves altogether.
.
While
this may sound like a simple black and white case of the super wealthy
versus the down trodden, in reality, there are many shades of gray in
terms of whom we are talking about economically or socially (as it
pertains to income). In other words, a sort of struggle even
among the various rungs of the middle class, each with new polarized
alliances, just as the political landscape already indicates. In
other words, there is a percentage of the population, even among the
middle class especially, that have no real retirement savings to speak
of, or other resources to carry themselves independently going
forward. Better explained, a group of people that if it were not
for the government check, they would have nothing (but that is not the
government's fault even though there are some people that would like to
make it so, which by definition, means the fault and problem of the
remaining citizenry).
.
Then
again, on the other hand, there is also a group that does have the
resources, simply because they have saved, they have stayed away from
excessive and foolish borrowing and otherwise have managed their own
personal affairs conservatively. This later group, I am afraid to
predict, will be the target of financial pogroms and otherwise, will be
made to suffer for their prudence (see the Tax Collection Responsibility Act of 2007 -
H.R. 3056 - that the US House of Representatives passed on
October 10). In other words, it is logical that government will
chase those that still have the money, rather than those who do
not. But is this morally correct? Is this a lesson intended
to demonstrate reward to those citizens that have been pious in their
own finances - or will there be mob rule, and the attitude that the
ends justify the means regarding monetary confiscation, for the sake of
keeping the welfare state afloat? Once again, this group of
solvent persons is not necessarily the martini drinking, yacht owning
crowd either, although some politicians do love to paint such a picture
when promoting such class warfare. Stated another way, not
necessarily the super wealthy, but instead average middle class persons
who are not broke (but are not mega rich either), and merely trying to
maintain what they already have.
.
While
much of our writing and related news items perhaps are slanted to
highlight this trend in the US (where we believe it is certainly more
pronounced than elsewhere), the truth of the matter is, that a
substantial number of countries face these same problems. Indeed
quite recently we highlighted a comment by the current President of
France in a previous newsletter, who says that France is broke and can
no longer fund the generous welfare benefits and subsidies doled out in
years past. And in the UK, we now see a new impetus to start
taxing non-resident citizens, which certainly is an about face from the
previous existing policy from decades past. So, the point is,
this is not simply a problem or issue affecting the United States, but
rather, a broad based issue that seems to commonly effect pretty much
all of the so-called modern welfare state countries. Of course,
with that said, it is also true that some of the nations are making an
attempt to do something about it by tighten up their balance sheets,
whereas others are not. We have mentioned Sweden in the past, as
one nation well known for very high taxation and very generous state
welfare benefits (generous even by European standards) that has made an
attempt to pay down it's own domestic government debt (as one way to
affront this coming problem, or at least be better prepared for
it). On the other hand, we see some other nations that seem to
continue spending money like a drunken sailor and running the printing
presses, seemingly convinced that will bring about the resolution to
their problems.
.
Regardless,
we think it prudent and logical to assume that there will be a
continued emphasis and trend towards more taxation and higher levels of
confiscation initiatives going forward. Mr. John Gist, from the
AARP Public Policy Institute, writes in a January 2007 report:
Our long-term budgetary challenge is to maintain the integrity of the
social insurance programs that provide health and income security for
current and future retirees without sustaining economic ruin. Our
ability to achieve that goal will depend chiefly on two factors: the
growth rate of health care costs and the WILLINGNESS OF THE
POPULATION TO BE TAXED. A starting point for avoiding a
future train wreck would be to maintain the same level of spending
restraint in our health programs that we have already achieved in the
past decade and refrain from enacting any additional tax cuts, allowing
revenues to rise automatically.
.
In
short, the government does need the money and it has to come from
someplace. Unfortunately, it just may come from that part of the
citizen population that should be praised for their fiscal prudence,
rather than castigated for it via even higher taxation or devaluation
of the currency. Meaning, castigation comes not in the form
of higher taxation or reduced government services necessarily alone,
but also in the devaluation of the money as well. Who is punished
when the currency dramatically losses it value? Truly only those
that have any form of savings, as the rest are broke and could care
less what the value is. Those that have saved are indeed punished
for doing so, as the currency losses value and purchasing power erodes
day by day. Is there any wonder why so many people are leaving,
plus investing their money outside of the country, and into other
currencies? In addition, is it so hard to imagine why the great
chase is on, by government, to confiscate the money before it goes?
.
Mr.
Milo Argenio writes on October 23, 2007 in an article titled: Exit
Ticket Tax An Outrage:
.
The
Tax Collection Responsibility Act of 2007 (H.R. 3056) that the House of
Representatives passed on October 10, if passed by the Senate, and
signed by President Bush, will require persons who give up U.S.
citizenship or long-term residence to pay a tax on all unrealized gains
of their worldwide estate that exceed US$600,000. The gains will be
assessed based on the fair market value of the assets and the tax due
within 90 days of expatriation. (Editor's Note: Good Luck
with that, and once again, another new law titled with a cute phrase
that gives no indication as to what the law intends to do. I
mean, is it really responsible to extort money from someone, like the
Mafia, simply because they decided to relocate? As for myself, I
am still hoping to win a date with the tooth fairy. Can we pass a
new law to make that happen?)
.
Congressman
and current Presidential Candidate Ron Paul writes in the October 15,
2007 edition of the Hawaii Reporter:
.
Other
anti-property rights provisions in the Tax Collection Responsibility
Act make desperate last attempts to extract the most amount of revenue
possible from expatriates on their way out the door. A telling signal
that a country is taxing itself to death is capital flight and
expatriation. When successful Americans no longer feel their property
is secure from government thieves, and they have too much to lose by
staying, they vote with their feet and go elsewhere. This country is
poorer for the loss of that citizen's investment here, but it is their
right to keep and enjoy what they have built up. How dare Congress or
the IRS try to deny them that? And what message does that send to the
next generation of young entrepreneurs?
.
Ms.
Carolyn Baker writes, in an article dated October 8, 2007 from the
Atlantic Free Press:
.
For
those considering expatriation, it will soon be too late to leave. For
those who choose to remain within this increasingly locked down nation,
it will be necessary to acquire survival skills, a strong community of
friends, and a great deal of stealth in order to navigate this empire's
exacerbating Orwellian treachery.
.
Mr.
Joseph Goebbels (Joey G. to his friends, and former minister of
propaganda for the Nazi government in Pre-World War II Germany) once
said: If you tell a lie big enough and keep repeating it, people
will eventually come to believe it. The lie can be maintained only for
such time as the State can shield the people from the political,
economic and/or military consequences of the lie. It thus becomes
vitally important for the State to use all of its powers to repress
dissent, for the truth is the mortal enemy of the lie, and thus by
extension, the truth is the greatest enemy of the State. Think of
the media as a great keyboard on which the government can play.
.
.
IN
THE NEWS:
.
.
CITI'S
MATH PROBLEM - By Gregory Corcoran -
November 5, 2007
.
CITIGROUP
just can't seem to get the number right. Its shares, down about
4%, are leading markets lower again today after the financial colossus
on Sunday announced write-offs of $8 billion to $11 billion to reflect
the declining value of sub-prime-mortgage-related securities just since
Sept. 30. (CNBC says the number could actually be closer to $12
billion.) That is on top of the $2.2 billion of trading losses and
mortgage-related write-downs the bank announced Oct. 15. As of Sept.
30, its exposure to highly leveraged financings totaled $57 billion -
$19 billion in funded commitments and $38 billion in un-funded
commitments.
.
http://blogs.wsj.com/deals/2007/11/05/citis-math-problem/
.
EDITORS NOTES:
According to Betsy Graseck of Morgan Stanley, Citibank has the largest
sub-prime exposure in the banking group at 13% of loans and 5% of
earning assets. How is it possible that a bank can loose money
(12 Billion Dollars is one of the more common estimates, yet there are
those analysts that estimate it could be as high as 64 Billion) in a
business line that banks are supposed to be most knowledgeable of,
namely mortgages and other kinds of loans? If these guys cannot
make money in the mortgage or loan business, and they are a supposedly
sound and savvy financial institution no less - it sort of makes you
wonder about what other cob-webs might be lurking.
.
.
OIL
RISES TO RECORD $94 AFTER U.S. SUPLIES DROP TO 2-YEAR LOW
By
Mark Shenk - October 31, 2007
.
Crude
oil rose to a record $94 a barrel after an Energy Department report
showed that U.S. inventories fell to a two-year low. Oil has advanced
14 percent this month. Stockpiles dropped 3.89 million barrels to
312.7 million barrels last week, the department said. It was the lowest
since October 2005. A 400,000 barrel gain was expected, according to a
Bloomberg News survey. Supplies at Cushing, Oklahoma, the delivery
point for New York futures, fell 17 percent. We've lost a lot of
oil at a time when we should be building supply for winter, said Phil
Flynn, a senior trader at Alaron Trading Corp. in Chicago.
.
http://www.bloomberg.com/
.
EDITORS NOTES:
At the time this newsletter is being sent out, oil is flirting with
US$100 per barrel, and since many commodities such as oil are priced in
US Dollars, and as the Dollar keeps dropping like an elephant free
falling from a ten story building, you can be sure the price of oil is
probably going higher (in the least to compensate for the currency
devaluation). On the other hand, if all the oil exporting nations
switched over to Euros (or whatever else), then another story. Of
course, many economic issues are inter-related and make for a self
inflicted demise of the Dollar. Meaning, a devalued US Dollar
caused in part by our favorite alchemists at the Federal Reserve
running the presses, which results eventually in higher commodity
prices (oil, wheat, copper, gold).
.
Current
estimates by some analysts claim that the Fed is expanding the money
supply by about 11 percent right now, in 2007, whereas some others put
the figure as high as 15 percent at the moment (remember that they
stopped reporting M3 statistics awhile ago, but some determined
analysts usually can figure it out, although it has become a bit more
difficult to do ever since the Fed stopped volunteering the
numbers). However, we know that there are some central banks,
such as in Saudi Arabia, that are trying to also devalue it own
currency, the Riyal, in order to maintain a stable exchange rate parity
with the US Dollar. As such, since it is reported that Saudi
Arabia has been recently expanding its own money supply (running the
presses) by about 18 percent for this purpose, we tend to suggest that
the commentary indicating that the US Federal Reserve is inflating the
money supply by 15 percent to be a more accurate estimate. Also,
the middle east is becoming nervous about keeping their currencies
pegged to the US Dollar, and if that happens, watch out (the Arabs
actually have more US Dollars than do the Chinese).
.
According to a November 14, 2007 article in
the UK Telegraph titled: Dollar Dives On Fears Gulf Will Abandon Link:
The dollar has slumped again on fears that the oil-rich Gulf states
will ditch their US currency pegs, setting off a massive realignment of
the global currency system and a flight from dollar assets across
Asia. Sultan Nasser al-Suweidi, the central bank governor of the
United Arab Emirates, warned that Gulf states may have to defend
themselves against imported US inflation.
.
In
regards to the devaluation, the result is higher consumer price
inflation (substantial food price increases have been very noticeable
in many markets lately). However, in order to dissuade investors
from dumping the dollar, the interest rates MUST go up to stop foreign
capital flight. However, that is not what is happening at the US
Federal Reserve. Instead, Ben Bernanke and company is looking to
cut rates instead (in what we believe will be an unsuccessful attempt
to thwart disaster from the credit market crisis, and the current
deflation in the housing market by pumping even more liquidity into the
system), allowing for even further devaluation. Explained a bit
better, the money exits stage left with the realization that the
interest rates will not compensate for the inflation or devaluation
(when a country wants to defend the value of its currency in the world
markets, the central bank usually raises rates, not lowers them).
Now does the Tax Collection Responsibility Act of 2007 make any sense
to you? Me thinks they are nervous that once some folks figure it
out, they will run like the dickens (with their money in
tow).
.
Raising
interest rates of course puts the brakes on the economy and causes
financial pain in some sectors, something which is not palatable
politically speaking both because of the approaching US Presidential
Elections and because the US economy is possibly already in recession
right now (if you examine some of the factual data out there).
And if you see what the central banks of Europe and elsewhere are doing
(with the exception of the UK, which is really in the same mess as the
US is in), they are either holding rates steady for the moment or in
some cases, increasing them. Bottom line is, you probably want to
at least hedge away from the dollar if you can. And of course if
the US Dollar is abandoned altogether in world markets, in terms of
major commodities pricing such as petroleum, there goes the price
support (the US Dollar used to be backed by gold, and since the removal
of gold backing, it has really been backed by oil). Some will say
this commentary is all rubbish, and others will say the US Dollar has
already gone as low as it can. Maybe, and then again, maybe not.
.
However,
in terms of Americans trying to hedge, most US based banks do not offer
Euro Savings Accounts or otherwise offer a way for US citizens to
switch money quickly and easily into another currency on the retail
banking level. In addition, there are more and more impediments
to moving (wire transferring) funds abroad, either due to so-called
money laundering or other issues lately. What is the
reason? I leave you with the following quotes to ponder:
.
ALAN GREENSPAN is quoted as once
saying: In the absence of the gold standard, there is no way to
protect savings from confiscation through inflation. There is no safe
store of value. This is the shabby secret of the welfare states
tirades against gold. Deficit spending is simply a scheme for the
confiscation of wealth. Gold stands in the way of this insidious
process. It stands as a protector of property rights. If one grasps
this, one has no difficulty in understanding the states antagonism
toward the gold standard.
.
MAJOR L.L.B. ANGUS is quoted as
saying: The modern Banking system manufactures money out of
nothing. The process is perhaps the most astounding piece of sleight of
hand that was ever invented. Banks can in fact inflate, mint and
un-mint the modern ledger-entry currency.
.
JOHN KENNETH GALBRAITH is quoted as
saying: The process by which banks create money is so simple that
the mind is repelled. Money is a singular thing. Over all history
it has oppressed nearly all people in one of two ways: either it has
been abundant and very unreliable, or reliable and very scarce.
.
JOHN MAYNARD KEYNES is quoted as
saying: Capitalism is the astounding belief that the most
wickedest of men will do the most wickedest of things for the greatest
good of everyone. The best way to destroy the capitalist system
is to debauch the currency. By a continuing process of inflation,
governments can confiscate, secretly and unobserved, an important part
of the wealth of their citizens.
.
FREDERICK SODDY is quoted as
saying: There is nothing left now for us but to get ever deeper
and deeper into debt to the banking system in order to provide the
increasing amounts of money the nation requires for its expansion and
growth. The whole profit of the issuance of money has provided
the capital of the great banking business as it exists today.
Starting with nothing whatever of their own, they have got the whole
world into their debt irredeemably, by a trick.
.
HENRY FORD is quoted as
saying: It is well enough that people of the nation do not
understand our banking and monetary system, for if they did, I believe
there would be a revolution before tomorrow morning.
.
RON PAUL is quoted as saying:
A system of capitalism presumes sound money, not fiat money manipulated
by a central bank. Capitalism cherishes voluntary contracts and
interest rates that are determined by savings, not credit creation by a
central bank.
.
THOMAS JEFFERSON is quoted as
saying: I sincerely believe that banking establishments are more
dangerous than standing armies, and that the principle of spending
money to be paid by posterity, under the name of funding, is but
swindling futurity on a large scale. If the American people ever
allow private banks to control the issue of their money, first by
inflation and then by deflation, the banks and corporations that will
grow up around them (around the banks), will deprive the people of
their property until their children will wake up homeless on the
continent their fathers conquered. He also said: I
predict future happiness for Americans if they can prevent the
government from wasting the labors of the people under the pretense of
taking care of them.
.
ERNEST HEMINGWAY is quoted as
saying: The first panacea for a mismanaged nation is inflation of
the currency; the second is war. Both bring a temporary prosperity;
both bring a permanent ruin. But both are the refuge of political and
economic opportunists.
.
.
OPEC
SAYS PUMPING MORE WON'T BRING OIL PRICE DOWN
By
James Kanter and Alison Smale - October 30, 2007
.
Representatives
from top oil producing countries Tuesday blamed the steady advance of
oil toward $100 a barrel on a combination of financial speculation,
geopolitical instability and a shortfall in refining capacity.
The president of OPEC, Mohammed bin Dhaen al-Hamli, who is also the oil
minister of the United Arab Emirates, pledged to keep markets amply
supplied. But at an oil industry conference in London, he said there
was only so much OPEC could do in the current circumstances to keep a
lid on prices. He declined to say if, or when, the price of oil
would reach $100, but he noted that OPEC members already had decided
last month to increase output by 500,000 barrels a day from Nov. 1.
.
The
Qatari Energy Minister, Abdullah bin Hamad al-Attiyah, spoke even more
bluntly about what he described as the futility of pumping more oil
into the market to bring down prices. To increase by 500,000 or
one million barrels, do you believe today it will bring back the price?
Attiyah asked. I don't think so, he said, emphasizing his
view that the price of oil had become almost wholly decoupled from
supplies. Attiyah also suggested that European governments in
particular were too reluctant to lower their high taxes on oil for fear
of losing precious revenues. Please don't blame us - you blame us
for the last 50 years, Attiyah said.
.
http://www.iht.com/articles/2007/10/30/business/oil.php
.
.
NO
REAL ALTERNATIVE TO OIL: RISE IN DEMAND SEEMS UNAVOIDABLE
By
Matthew Saltmarsh - October 29, 2007
.
During
the early 1930s, when oil prospecting in the Gulf was in its infancy,
George Lees, chief geologist for the Anglo Persian Oil Company,
proclaimed that he would drink all the commercial oil that might be
discovered in Bahrain. In recent years, Bahrain has produced
around 185,000 barrels a day - modest by regional standards, but not
easy to drink. The story resonates with those who are optimistic
about the prospects for future oil supply. Energy demand is
surging as robust growth in developing economies offsets slower demand
in the West. At the same time the scientific warnings are becoming ever
starker over the global warming caused by more carbon emissions from
fossil fuels.
.
Interest
in alternative, sustainable energy sources has never been
stronger. Yet, despite accelerating investment, the output
capacity of these energy forms remains barely more than embryonic.
Fossil fuels, reliable and accessible, will continue to provide more
than 90 percent of global commercial energy needs to 2030, according to
the Organization of Petroleum Exporting Countries. Leo Drollas,
an executive director at the Center for Global Energy Studies in
London, shares the assessment. Oil will be the world's most
important energy source for some time, he said. Many times we
hear that it's the end of oil, it's the end of the world. It's never
happened.
.
http://www.iht.com/articles/2007/10/29/business/renover.php
.
EDITORS NOTES:
Certainly we can imagine continued inflation pressures due to higher
and higher oil prices as we move forward. In addition, as
competition for oil among importing countries escalate, we can also
predict some shortages and political conflicts directly related to that
dark gooey liquid that fuels our modern day society. Part of the
answer of course would be a concerted effort to apply alternative
energy technologies so the dependence on oil is reduced. But
aside from the green initiatives of the Europeans (the Germans and
Dutch especially) and the previous efforts of countries such as Brazil,
the author of the above article is probably quite correct in saying
that the efforts of most other nations, remains embryonic. The
oil producing countries have us by the throat, economically speaking -
but whose fault is that really? The American oil companies
seemingly have the politicians in their pockets also, and whose fault
is that as well? Alan Greenspan is quoted as saying
recently: I am saddened that it is politically inconvenient to
acknowledge what everyone knows: the Iraq war is largely about
oil. Funny how the maestro waited until he was retired to crank
out that observation, or did he become a smarter, new man in retirement?
.
.
GM PLANS A RESEARCH CENTER IN SHANGHAI FOR
HYBRID TECHNOLOGY
By Keith Bradsher - October 29, 2007
.
General
Motors announced here Monday that it would build an advanced research
center in Shanghai to develop hybrid technology and other designs, in
the latest research investment in China by a foreign automaker despite
chronic problems with purloined car designs. GM already has a
sprawling, 1,300-employee joint venture research center in Shanghai
with its main Chinese joint venture partner, Shanghai Automotive
Industry. The separate, wholly owned project announced Monday,
for the most advanced vehicle engineering and development, could help
GM keep greater control over new technologies than if it conducted the
research through the joint venture.
.
http://www.iht.com/articles/2007/10/29/business/gm.php
.
EDITORS NOTES:
Here is the thing. Of all the places to put in a new research
center for alternative energy technologies, where does a good old
American car company choose? Detroit? Texas? California?
Massachusetts? No, of course not. After everything we know about
the trade deficits and other problems, after the Chinese have
constantly brought in joint ventures from foreign companies so they can
steal the technology and set up competing businesses of their own -
these supposed learned people from corporate boardrooms continue to
keep on doing the same old thing by giving the store away. As a
supporter of the free market system and also someone who could be
called a libertarian on many issues, I do believe that private business
has the right to invest or set up shop where they wish, but one does
wonder sometimes about these decisions in regards to the long term.
.
I
hate to always sound negative, but I have to tell you that in my
opinion, it would seem to be all over for US manufacturing, not to
mention research and development, which is truly the incubator of new
technologies and growth. Look around at the items for sale inside
the US right now (and Europe too). Sixty percent of all computer
equipment is manufactured outside of the US, 67 percent of all clothing
and apparel, 87 percent of all electronics, 90 percent of all shoes and
footwear, and an estimated 95 percent of all toys now in 2007 are made
some place else. And if you include those people currently
dependent upon the US government for income (actual government
employees plus social security recipients combined), one can argue that
the government is now the largest employer or source of income for
individual citizens in the country (sounds more like a centrally
planned economy). Where does that money come from? Business
taxes? What business remains to be taxed? And our modern
day Errol Flynn, Congressman Charles Rangel, wants to cut corporate tax
rates even further (while giving it to the middle class once again).
.
After
all we know about the economic and trade consequences of what has
already happened, to install a new research and development facility to
tackle a very major problem (oil consumption) confronting the so-called
homeland by placing it in another competing market offers no clearer
indicator of what the future holds. In summary, it is as if one
is photo-copying the play book and giving it to the other team before
the big game. Why would you do that, unless for some strange
reason you wanted the other guy to win? It is not the fault of
the Chinese, the Arabs, the Russians, swamp gas, little green men from
Mars, or anything else. As the US economy, job prospects and
former leads in technology disappear, the boogey man is actually the
fellow in the mirror.
.
You
may find it hard to believe, but my intent is not to rant and rave, or
simply complain for the sake of sounding off. There are a few
journalists out there already doing a much better job than myself for
that. No, the real concern is, how will this all play out?
How will our clients be effected economically and otherwise down the
road? What options do they have? Once again, I give you the
words of Ms. Carolyn Baker (repeated from above) who says: It
will be necessary to acquire survival skills, a strong community of
friends, and a great deal of stealth in order to navigate this empire's
exacerbating Orwellian treachery.
.
According to an October 25, 2007 news
article from Asia News: Legendary US investor Jim Rogers
announced that he was shifting all his assets out of the US dollar and
buying Chinese Yuan because the Federal Reserve had eroded the value of
the US currency. The US dollar is and has been the world's
reserve currency, he said. That's changing. The pound sterling,
which used to be the world's reserve currency, lost 80 per cent of its
value as it went through the whole period of losing its status as the
world's reserve currency. China will be the most important
country in the 21st century, he added.
.
.
GREENSPAN: BEWARE PRIMORDIAL FEAR - By Darla Mercado -
October 31, 2007
.
Former
Federal Reserve chairman Alan Greenspan was mildly optimistic about the
odds of the U.S. economy heading into a tailspin. Mr. Greenspan
put the likelihood of the U.S. hitting a recession at less than
fifty-fifty. So far we're doing all right, but it's very
uncertain, he added, noting that the economy will come out of the
recent credit crunch, but low prices on homes and a large inventory of
new houses will hold the recovery back. The former Fed chairman
also warned of the strain the baby boomers will place on the economy
over the next 25 years as they age and retire. A smaller
workforce means fewer tax dollars to go around.
.
The
problem is that when you think of what the economy will look like after
the boomers are retired, you'll be dealing with the baby bust
generation, Mr. Greenspan said. The labor force isn't rising, so
the resources to meet the claims are seriously in question.
Closing his discussion, Mr. Greenspan added that the markets are
subject to emotion, not rationale, so exuberance can give way to
primordial fear. Will we have another crash? Yes. Will we have
another credit crisis? Yes. Can we do anything about it? No, he said.
.
http://www.investmentnews.com/
.
EDITORS NOTES:
When the guy was in charge of the Federal Reserve, you could never get
a simplified straight answer out of him. While he was Fed
Chairman, he reportedly said: I guess I should warn you, if I
turn out to be particularly clear, you've probably misunderstood what
I've said. Now that he is supposedly retired, he can't stop
talking and he says with great clarity: Will we have another
crash? Yes. Will we have another credit crisis? Yes. Can we do anything
about it? No, he said. Sort of makes you think that Greenspan has
gone to work for the Shotgun and Canned Goods lobby (and people say
that I am overly negative?).
.
Alan
Greenspan also very recently commented that Hyper Inflation is a very
real possibility in the US if these current bets Mr. Bernanke is
placing do not pay off. Which is to say, by inflating the money
supply to the tune of 15 percent (while the economy is possibly already
in recession or at best case growing at 2 percent, if the sunshine boys
from Washington are to be believed regarding the more positive
numbers), and cutting interest rates as well (to add insult to injury),
the US Fed is playing a very dangerous game. Too bad the people
that may crap out, as it were, are the middle class with any savings
and those people on a fixed income.
.
.
THE COMING TAX TSUNAMI - by Pamela Villarreal
and D. Sean Shurtleff - October 29, 2007
.
Over
the next 25 years American taxpayers will face a fiscal tsunami.
The first of the baby boomers will be eligible for early retirement
beginning next year, and will be eligible for Medicare in 2011.
The last of the Baby Boom generation, born in 1964, will reach normal
retirement age (67 years) in 2031. Most baby boomers are
approaching their peak earning years when they have the greatest
capacity to save for retirement. Many failed to save when they
were younger and need to catch up. Unfortunately, expected tax
increases will make it increasingly difficult for each
succeeding age cohort to save for retirement. Following are some
of the tax hikes coming down the pike.
.
2007: The Exploding AMT. The
idea behind the Alternative Minimum Tax (AMT) was to tax wealthy
households who had so many deductions they paid no income tax.
But the income threshold for the AMT was not adjusted for inflation for
many years. As a result, the number of people required to pay the
AMT grew steadily.
.
2008: Medicare, the Sleeping Giant.
Over the past four years, the revenue generated by the 2.9 percent
payroll tax for Medicare Part A (Hospital Insurance) has fallen short
of outlays. In 2006, this annual deficit reached $10
billion. Moreover, over the next 10 years, Part A expenditures
are expected to grow 85 percent to $385 billion, and the projected
annual shortfall will grow to nearly $45 billion in 2016.
.
2009 to 2011: The Disappearing Bush
Tax Cuts. The 2001 and 2003 Bush income tax cuts lowered
tax rates throughout the income range and reduced capital gains
taxes. But if the provisions are not made permanent, these
reduced rates will expire soon
.
2017: The Incredible Shrinking Social
Security Surplus. Currently, the payroll taxes of today's
workers pay the Social Security benefits of today's retirees, with a
surplus left over that is spent on other government programs. In
2017, however, Social Security expenditures are projected to exceed
dedicated revenues. By 2020, the deficit will reach almost $68
billion, and will continue to increase thereafter.
.
Avoiding
the Tsunami. Workers planning to
retire in the next 25 years will have fewer opportunities to save and
will face a higher tax burden to boot. What can be done to
avert this impending disaster?
.
http://www.ncpa.org/pub/ba/ba600/
.
EDITORS NOTES:
By most official estimates, Medicare and Social Security by 2034 will
eat up 20 percent of the Gross Domestic Product, equivalent to today's
entire budget. The next president, if he or she serves eight
years, will find themselves in very dangerous waters, says Judd Gregg (
New Hampshire, Republican member of Congress). There is no way to
support this system as it is constituted. Indeed, starting in
2017 the money going out will exceed the money coming in. And
what about the so-called existing reserve? There isn't one, all
of that money has been spent and replaced with chits that basically say
something to the equivalent of I OWE YOU, a promissory from the US
Treasury (and where will they get the money to pay back the
IOU?). The author of the above news article uses the term -
fiscal tsunami. There are two things you can do when faced with a
tsunami, either get ready to drown or, get out your surf board (and
catch the wave).
.
.
RANGEL MOVES TO ABOLISH AMT - By Sara Hansard -
October 25, 2007
.
Secretary
of the Treasury Henry Paulson is increasingly concerned that Congress
will delay extending relief from the alternative minimum tax for
another year. It is obvious that Congress does not have the time
this year to undertake a large, complex tax bill, and I am increasingly
concerned that we are not seeing timely action on an AMT patch, Mr.
Paulson said after House Ways and Means Committee chairman Charles
Rangel, D-N.Y., introduced major tax legislation that would abolish the
AMT. The legislation introduced by Mr. Rangel would dramatically
raise taxes in ways that in my judgment would hinder Americas ability
to compete in the global economy, Mr. Paulson said.
.
http://www.investmentnews.com/
.
EDITORS NOTES:
If there ever was a poster child for the welfare state, you cannot do
any better than Congressman Charles Rangel, a sort of would be modern
day Robin Hood. And is he suggesting all this to assist the down
trodden middle class? Maybe not entirely, as one could argue it's
all about getting more dough into the government baking ovens. According to a November 1, 2007 article in
the National Review by Mr. Phil Kerpen titled: The Mother-In-Law
of All Tax Bills, he writes: The top individual income-tax
rate, under this law, would go from 35 percent this year to 44.2
percent in 2011, which would do serious damage to the economy. We're
going to come up with a rate that's higher than even the countries in
Western Europe, so said House Minority Whip Roy Blunt
(R-Mo.). Regardless, it is interesting to note that Rangel's tax
bill actually, and once again, LOWERS
corporate income taxes. This is noteworthy because current US
corporate income taxes are already the lowest they have been in about
three decades, AND the government gets most of its tax revenue
currently from individual income taxes (the middle class) and not
corporations anyway. And so, it would seem this is a political
slight of hand that actually forces the individual (read private, non
corporate) citizens to pay even more of the taxation burden than
before. Surprised? We surely are not, and expect more, not
less, of this kind of nonsense going forward.
.
.
WHAT TAX HAVENS TEACH US ABOUT THE BENEFITS
OF LOW-TAX ECONOMIES
By Matthew Lynn - November 5, 2007
.
What
are the three richest countries in the world? You might be tempted to
answer America, maybe Switzerland, or perhaps even Ireland. The right
answer, however, is Luxembourg, Bermuda and Jersey in that order.
Of the 20 wealthiest nations, 13 of them are low-tax territories.
Luxembourg, Bermuda and Jersey might lead the way, but the top 20 also
includes: Equatorial Guinea, Guernsey, Ireland, the Cayman Islands,
Andorra, Hong Kong, the British Virgin Islands, the Isle of Man, San
Marino and Switzerland.
.
The
wealth of some of those territories is striking. Luxembourg and Bermuda
have a GDP per capita of $71,400 (£35,072, E50,250) and $69,000
respectively. By contrast, America, the wealthiest of the mainstream
industrial economies, has a GDP per capita of $44,000. Even the
worst-off low-tax nation, Switzerland, has a GDP per capita of $33,000.
And Britain, despite the endless boasting from Gordon Brown about the
brilliance of its economic record, ranks only 28th in the world, on
$31,800, slightly below Germany, and just a tiny bit above France.
.
http://www.caymannetnews.com/news-3197--5-5--.html
.
.
JEREMY WARNER'S OUTLOOK: WORLD CURRENCY
SYSTEM AT BREAKING POINT
October 31, 2007
.
Currencies
were bouncing around all over the place yesterday as traders placed
their bets on what the Fed might do to US interest rates after today's
meeting of the Open Markets Committee. For sterling, there is an
equally important meeting next week of the Bank of England's Monetary
Policy Committee. Yet whatever the opportunity for interest rate
arbitrage, the big picture in currency markets remains the same as it
has been for some while now, with the dollar in apparent freefall and
other developed market currencies strongly appreciating. These
adjustments are to some extent justified as a natural reaction to the
problems of the US economy, with its humongous twin budget and
current-account deficits and fast-slowing growth rate.
.
Yet
there is another dimension to all this, which is proving very
uncomfortable for Europeans as their currencies continue to appreciate
against the dollar. A number of currencies remain effectively pegged to
the greenback, creating major distortions in the usually corrective
pricing mechanisms of the free-market system.
.
The
global currency system has become as much of a mess as it was when the
Bretton Woods Accord of fixed exchange rates began to break down from
the late 1960s onwards, perhaps worse still. The late Herb Stein,
President Nixon's economic adviser, once remarked that if something
cannot go on forever, it will stop. But as ever, the question about the
present bipartite system of exchange rates is when?
.
Even
within China, the pressures to allow a faster rate of appreciation
against the greenback are becoming intense. Interest rates are rising
in China, but falling in the US, making defence of present exchange
rates tougher still. As it is, the Chinese authorities face massive
portfolio losses on the dollar assets they have bought in defence of
the trade surplus with the US. China wants to move at its own pace,
with a gentle deflation of present pressures. The danger for the world
economy is of a much more explosive resolution.
.
http://news.independent.co.uk/business/comment/article3112866.ece
.
.
INVESTORS AGREE: ANYTHING BUT THE DOLLAR
- By
Carter Dougherty - November 7, 2007
.
In
financial market jargon, a flight to quality when times are uncertain
used to be synonymous with buy dollars. Not anymore.
Currency traders gave the U.S. dollar a thorough pounding Wednesday and
pushed the value of the euro to $1.47, the highest on record. The Swiss
franc rose to a 12-year high against the dollar, and the pound climbed
to the value it reached 26 years ago. Other assets looked
alluring to traders worldwide. Gold rose to around $848, almost
reaching the highs it achieved in 1980, the tail end of its last big
rally. And crude oil, still the world's chief source of energy, perched
on the cusp of $100 a barrel.
.
In
short, markets appeared firmly in the grip of a mood that seemed to
scream for any investment other than the dollar, a reflection of a
broad lack of confidence in a U.S. economy that could not seem to put
the sub-prime mortgage crisis behind it. Unusually, powerful new
Chinese investors appeared to endorse the idea that the U.S. currency
was bound to fade as a result. An unprecedented public
badmouthing by the Chinese government - a colossal dollar investor by
virtue of its $1.43 trillion in currency reserves, most of which are
presumed to be denominated in dollars - helped drive the U.S. currency
lower Wednesday.
.
The
European Central Bank seems set to stand by the strong euro when it
meets Thursday to set interest rates - offering a credible alternative
to a U.S. currency that now seems less indispensable than it has in
some time. Russia and several Middle Eastern countries, flush
from oil and natural gas sales, have similar sovereign wealth funds -
and their appetite for assets not denominated in dollars appeared to be
growing by the day.
.
http://www.iht.com/articles/2007/11/07/business/dollar.php
.
EDITORS NOTES:
Readers of our newsletter for some time will recall our comments about
the possibility of the Chinese dumping dollars if the US Federal
Reserve allows for a severe devaluation of the dollar (via policy) or a
refusal to increase interest rates to compensate for inflation, or
both. In other words, who in their right mind wants to hold onto
something dropping in value? However, we would agree with many
commentators who speculate that it is not to the benefit of the Chinese
to dump over US$1 Trillion Dollars in cash onto the worlds currency
markets overnight, thus forcing a further drop (this is something that
needs to be done slowly but surely over time, in an orderly fashion, if
possible). Plus, even though everyone talks about the amount of
US Dollars that China has built up over the years, the Middle Eastern
Oil Exporting nations actually have more dollars than the Chinese,
although that never gets too much air time.
.
Then
again, maybe all this is an intended ploy by the US Federal Reserve as
a sort of intended economic cruise missile to the Chinese, on purpose,
paying back foreigners who own US Government Bonds with devalued funny
money. After all, devaluation is always a great swindle for the
borrower but never good for the lender. In essence, you borrow
one dollar (that was worth a dollar when you did the borrowing) and
then pay the other guy back with devalued funny money worth much less
later on, getting something for nothing, as it were. Such a deal,
although the Chinese are not at dumb as you might think (and remember,
China may be the birth place of Confucius, but it is also the home of
Sun Tzu, who wrote the art of war).
.
On
the other hand, the US has become a net debtor nation, and finances its
deficits via the kindness of strangers, as Blanche Dubois would
say. And so, if the rest of the world begins to refuse to loan
the US Government any more money by refusing to buy or own any more US
Dollar denominated debt, especially with the lower interest rates -
then where will this other financing come from? Remember what
happened in August when the credit markets seized up like an SUV
running on what remaining vapors existed in an empty gas tank?
Take a look at what is happening now in November, once again. All
that liquidity that Bernanke is pumping into the economy is certainly
not going back into the commercial paper markets as a price support
(which was the intended hope and plan). Instead, investors are
sitting on the sidelines, waiting to see what other American bank will
announce a new record loss equal in amount to the GDP of a small
country.
.
One
way to rectify this scenario is to wipe out or pay off your debt with
the freshly printed devalued monopoly money, maybe create a new
currency later on, and then start the circus all over again. Are
some conspiracy theorists correct in that all this is a concerted move
to scrap the greenback in place of a new AMERO currency (and severe
economic pain is one way to get the public to go along with it)?
If that is not the intended outcome, then what is? Why destroy
the value of your nations currency? I honestly do not know the
answer, but pose the questions just the same as a thinking exercise for
some possibilities to ponder.
.
In
economics, it is always true that some people win out, and some loose
no matter what the policy is - as this is the double edged sword when
it comes to such policies. For example, higher interest rates are
good for someone living off their investment income, but certainly bad
for borrowers. People in hock up to their eyeballs of course want
low interest rates, in order to keep the payments down, regardless of
what other problems that may cause. Similarly, allowing the
currency to devalue is usually good for domestic manufacturers
exporting goods, by making their products cheaper abroad (assuming
there is any manufacturing left), and good for people with loans to pay
off - using cheaper inflated dollars to do so, but of course bad for
local citizens vacationing in other countries (that find out a cup of
tea in Paris costs the equivalent to say US$35 when on vacation and
when you calculate out the exchange rate), or bad for anyone buying a
foreign made product, who keeps seeing the prices go up accordingly in
the domestic local stores. In any event, the main idea is to make
sure you understand very clearly how some of these scenarios might play
out, and try to protect your own personal finances as best you
can. Some are going to win out by making the right moves and some
will roll under. Usually it is better to be the guy that does not
get wiped out financially, if you can help it.
.
.
RON PAUL, THE EXPATRIATE'S PATRIOT -
By Joshua Snyder -
November 6, 2007
.
Ron
Paul gives the more than five million Americans living abroad the
opportunity to hold their heads a little, no, a lot higher. Having
spent twelve of the last fourteen years abroad, in Chile, Malaysia, and
South Korea, this writer, for one, has never felt prouder to be an
American than in the recent months since Dr. Paul of Texas launched his
presidential bid. But it is not to make our lives easier that
Paulistas abroad support the man. Most Americans abroad hope to return
home someday, and we hope to return home to a country that we
recognize. It is even becoming doubtful whether we will even have
country to which to return, a possibility pondered by Michael S. Rozeff
in his recent essay, On Track for U.S. Collapse. Ron Paul is the only
candidate who speaks of turning things around. Your fellow
Americans abroad want to come home someday!
.
http://www.lewrockwell.com/orig8/snyder-joshua5.html
.
EDITORS NOTES:
While I must admit to being a fan of Ron Paul myself, this is not meant
to be any sort of endorsement. Rather, my main interest is to
alert you to the number of Americans living abroad (the author of this
article is one), who may think exactly as you do. In fact, my
guess would put the numbers exponentially much higher than 5 million,
but the truth of the matter is, even the US Census Bureau basically
gave up after being tasked with counting Americans abroad by US
Congresswoman Carolyn Maloney, who in 2001 was eager to tax those
estimated Six Million expatriates (by her estimate) whom remain
unaccounted for by big brother. Mr. Charles Louis Kincannon,
director of the US Census Bureau testified on September 14, 2004 after
spending approximately $7.8 million over three years of the tax-payers
money, that the Census Bureau has determined that taking a census
overseas would present unique difficulties, difficulties that cannot be
resolved by the methodologies and tools the Census Bureau uses to
conduct the decennial census stateside. He goes on to say
that: Many Americans living abroad in these countries either did
not know about the test or understand its purpose. Others chose not to
respond, citing concerns about privacy and their taxes.
.
So,
Mr. Kincannon thinks many American living abroad did not understand the
purpose? I have news for you, they understand much more than you
think, which is why the US State Department does not have a clue as to
how many Americans have in fact expatriated over the past few years,
nor where they all are exactly (most certainly do not register with the
US consulate in the country of residence). Mr. Kincannon goes on
to claim that many cited concerns about privacy and their taxes.
You think? Anyway, the point is, there are many more people out
there just like you. Believe it. Also believe that the
bureaucrats have taken notice, and will be looking for even more ways
to stem the tide of outbound assets (they could care less if you leave,
it's the money they are worried about, as the tax collection
responsibility act of 2007 demonstrates).
.
.
READERS
WRITE IN:
.
Mr.
Schroder: Since I became your reader and admirer for disclosing
Information not available even in prestigious news papers; I would Like
to ask you some important questions in order to know more about what to
expect from the chaotic and irremediable situation in USA. First:
Are the IRS and the US Treasury department governed and controlled by
the US government? Second: Is the US Federal Reserve in the same
category? Thirdly: How much is the intrinsic value for the US
Dollar. At this point and the economic future of this country under the
current economic syndrome. Also I would like to know how much the
dollar was worth in 1913. Please, your opinion on these matters
will be appreciated. As a retired person, I desire to know in
order to move out of this catastrophic situation.
.
EDITORS REPLY:
Allow me to start off by explaining that there are some people who want
to believe that a secret cabal or underground group of wealthy
eccentrics are behind the scenes, manipulating everything from the
price of oil, to the price of underwear. To tell you the truth, I
could not say if that is true or not, as I have no proof one way or
another (they say a really great conspiracy is one you can never prove,
but the fact you cannot prove it also proves nothing as well). In
addition, there are some people very concerned and passionate about the
constitutionality of the IRS, of the National Income Tax and so
on. At the end of the day, whether or not you can prove how legal
or illegal the existence of anything might be (constitutionally), or
whom is behind what in terms of manipulation, the control of the
judges, courts, jail cells and various posse organizations is out of
our hands (yours and mine both).
.
While
none of us have any magic crystal ball, and certainly none of us have
any influence over what kind of alchemy they may try at the Federal
Reserve, just as in calculating a game of chess, one can try to think
about all the various possibilities and make our moves accordingly, as
they say. For some clients, that has meant choosing expatriation
or the decision to move abroad. Others have been investing in non
US real estate or shifting assets out of the US Dollar and into gold or
other currencies. And some have actively been seeking out dual
citizenship options regardless where they have decided to physically
plant themselves. Are these things the best course of action?
Only time will tell, although I have a client that likes to say, he
would rather be wrong in Panama City, Panama - rather than right in
Panama City, Florida.
.
For
a brief world history of money, see the following link:
.
http://www.pbs.org/wgbh/nova/moolah/history.html
.
For
a quick history of money and central banking in the US, see the
following:
.
http://www.ronscurrency.com/rhist.htm
.
|
|
|
